Inflective Havoc
Reflections on Our Big Entrepreneurial Times from Jan Horsfall

Sep
25

 After helping found Startup Colorado and Startup Colorado Springs and spending the better part of my free time over the past decade in support of our startup communities in Boston, New York, Colorado, and Colorado Springs specifically, I’m appreciative that there’s a huge difference between folks who really support entrepreneurship consistently and those who veer towards the rut of bureaucracy in some strange, elongated dance suggesting they’re supportive – when they’re really not.

The irony is that the same thing that separates entrepreneurs from non-entrepreneurs – innate passion, belief in innovation, irrational trust in peers, and unconditional support for their brethren – are the same things which slowly get chipped away as many of these once supportive individuals and groups respectively become just another ineffective, form-over-function, acronym – symbolic of bureaucracy and lack of support. Groups that start out supporting our newcos with so much gusto all of a sudden become detached and wither away. And every time I see it happen it makes me sadder than the time I saw it happen before. The only hope is reinvention and a sense of what brought you to the party in the first place. 

One of the difficult things associated with supporting entrepreneurs unconditionally is that there really isn’t much you get for the effort while it’s all taking place. You’re spending hours and hours of time supporting companies who have very little money, very little mileage on the odometer, who are operating against the tallest of odds – and who never pick up a lunch tab. It’s hard to tell people to help area entrepreneurs unconditionally when there’s really nothing in it for them other the good feeling one gets from helping these new companies avoid the risks associated with being startups. I remember Brad Feld suggesting at a Startup Colorado board session that “if people don’t get entrepreneurial support for what it is, then don’t bother with them and move on.”  Amen brother. Said another way: if you’re not willing to help unconditionally for reasons un-associated with your own well being, then please don’t get involved in the first place. And if you find yourself in this position after being an unconditional supporter, then rethink what you’re doing and reset. Otherwise you’ll just waste a lot of peoples’ time.

It always strikes me when the inflection point hits these local and regional support groups and they all of a sudden become more about who they are than the basic idea of supporting the entrepreneurs they set out to represent.  Sadly, too many times when entrepreneurial support groups find a degree of size and shape, they ironically start to quit acting like entrepreneurs and start acting more like the ineffectual bureaucracies they were built to replace! In the worst cases, it’s more about their perception of how they’re being viewed and less about the reality of whether or not they’re really helping startups succeed.

The beautiful, beloved Hawaiian surfer, Rell Sunn, was asked before she passed away at a young age, “why are you such a giving person?” Her response is worth its weight in gold and yet hard for a lot of people to understand: “You give and you give and you give – and you give from here (the heart) – until you have nothing else to give.”  There weren’t any conditions for Rell when it came to giving. That’s what made it easy for her. Entrepreneurial support groups come in all shapes and sizes, but they’d be well put to heed Rell’s commentary. If you’re really supportive of entrepreneurship, then it’s not about what you get in return or how you’re perceived by the community – it’s about giving again, unconditionally, until you have nothing else to give.

While a hard thing to understand in our cynical, ‘what’s in it for me’ society, try to remember what makes supporting entrepreneurship so special to begin with: the entrepreneurs themselves and their success over long odds.

– Jan

     

Advertisements
Sep
16

   After prepping yet another emerging company for their Series A, I can’t get the book “The Founder’s Dilemmas” out of my head.  In many ways, Noah Wasserman is the Jim Collins of the Entrepreneurial Set – combining years of anecdotes into a cohesive understanding of why our newco brethren spin out when they least expect it.  In concert with some of the other new books enveloping the management techniques associated with these organizations “dedicated to creating something new under conditions of extreme uncertainty” (thanks Eric Ries), more than ever it’s apparent that we create more uncertainty and more risk when we don’t check that box which reads “founders and funders agree on high growth approach”.

Said simply, along with all of the other items we’re quick to check off in the spirit of ‘alignment’ (pro formas, term sheets, business plans, gap analysis, legal formation, etc.) we need to make sure we clearly understand founders’ and partners’ expectations in terms of whether the company will be managed as a small business or a high growth business. From my perspective, I tend to look at a company from their capital formation backwards, a technique I learned many years ago when running White Summit. I looked at over 700 new tech companies during that time frame and came to appreciate that if money had changed hands as part of a capital injection, then the source of that funding had to discuss and agree upon the growth strategy for the company prior to funding. Or not.  But either way, a strong precursor of success or failure was evident based on how this was handled.

One thing that Wasserman reminds us of in his outstanding text is that the clearly defined differences between a small business and a high-growth start up are remarkably clear and understandable, as long as they’re discussed prior to any funding event taking place. The fact that this dramatically lowers risk either way – heading forward as a small biz or as a high-growth startup – shouldn’t get lost on anybody. And yet I continue  to run into confusing expectations – and the resulting ‘people issues’ – at about the same pace as Wasserman suggests. Around 70% of the newco wipe outs are related to the misaligned expectations of the founder(s) and their funding arm.

As I’ve been discussing new leadership opportunities with a variety of startup ventures, I can instantaneously appreciate whether or not there’s an issue at hand simply by understanding whether or not the check box for ‘expectations’ is in place or not. When it’s in place – let’s call it 30% of the time as Wasserman suggests – then the business feels healthy, vibrant, and focused on the collective strategy/execution process. When it’s not, there’s a clear feeling that the ‘push me – pull you’ effect of the misunderstanding is undermining the ability of the concern to actually focus on the business challenge at hand instead of the drama surrounding unclear expectations. And startups need extra drama like we all need a proverbial hole in the head.

Pete Skalla and I have discussed as of late the need to accentuate this issue with all of the startups in our collective ecosystems. Via Startup Colorado and Startup Colorado Springs, we really feel compelled to get the word out that one major risk factor can be eliminated simply by addressing the issue head on. As Pete so eloquently put it in his blog last week, the differences are clear and easy to understand – neither is wrong per se – but both require completely different mindsets, commitments, and understandings related to decision-making and approach. Without this understanding, bad things happen. His fantastic overview can be read here:  Startup or Small Business?

I’d urge everybody in the process of supporting our heroic entrepreneurs to make sure that they clearly understand the differences for the sake of their company’s future. In the absence of this simple understanding, we can look forward to over two-thirds of these newcos heading through the guard rail. With an astute appreciation for what it means – thanks to guys like Wasserman and Skalla – we can lower the mortality rate and see more of these revolutionary companies through to a big win.

Grow big! 

– Jan

Jun
22

Come and join us next week – Tuesday, June 26th from 6:30 until 9:00 PM – at The Warehouse Restaurant in CS (29 West Cimarron Street) – as we celebrate the advent of Startup Colorado Springs! Below  is  the formal press release of our announcement. 

– Jan

   

FOR IMMEDIATE RELEASE

Contact:

Jan Horsfall / janhorsfall@gmail.com

(Or) Nick Lee / nicklee3@gmail.com

719.661.6185

Startup Colorado Springs™

www.startupcoloradosprings.com

SPRINGS STARTUP BECOMES STARTUP COLORADO SPRINGS 

Tech Entrepreneurial Group Becomes Part of National Program, Startup America Partnership®

COLORADO SPRINGS, CO (PR Web) June 19, 2012

Springs Startup, launched last November to surround the growing tech entrepreneurial movement in Colorado Springs, is taking another step forward by announcing today that it is changing its name and branding to Startup Colorado Springs (www.startupcoloradosprings) and formally becoming part of the Startup America Partnership. Startup America (www.s.co), chaired by former AOL CEO Steve Case, has grown from activity in four states in late 2011 to entrepreneurially-led participation in over 40 states, including Hawaii and Puerto Rico. Startup Colorado Springs will operate as a non-profit entity.

“Since our inception, our goal of supporting entrepreneurs as a group of entrepreneurs ourselves has never changed,” noted Jan Horsfall, co-chairman of Startup Colorado Springs and a co-founder of Startup Colorado® (s.co.s) – the statewide initiative tied back in with Startup America. “We saw what was being accomplished at the hub – Startup America – and we saw what was happening at the state level with Startup Colorado, and it just made infinite sense to pull this hub-and-spoke thinking all the way down through our growing entrepreneurial scene in Colorado Springs. We have more air cover for our startup community than ever before and Startup Colorado Springs simply supports it wherever we see it.”

Nick Lee, who along with Ian Lee, John Stewart, Chris Franz, and Horsfall, co-founded Startup Colorado Springs, agreed. “Each stage of Startup America provides different assets to entrepreneurs depending on the new company’s needs. Startup America is all about providing the platform for us to understand how we can organically create more entrepreneurial assistance through shared learning and programs. Startup Colorado is all about identifying the resources up and down the Front Range that entrepreneurs can utilize within a state setting. To us, Startup Colorado Springs is about providing the local, personal connectivity and assistance – through entrepreneurs and not through government programs – to our startup community.”

“It’s really a group of mentoring entrepreneurs who want to make our community better by helping each other out,” noted Horsfall, “and by helping the other groups in town who are supporting entrepreneurship by assisting them in communicating their offerings.”

Startup Colorado Springs will host a summer party gathering at The Warehouse Restaurant (29 West Cimarron Street) next Tuesday, June 26th from 6:30 PM until 9:00 PM to unveil the new look and communicate what’s ahead for entrepreneurs this summer.

“We have so much energy right now from the entrepreneurs and we want to build on that,” noted Ian Lee.  “Pikes Peak Bank and Epicentral – both amazing supporters of our entrepreneurial cause are helping us sponsor the event and we’ll have some great giveaways from Allegra, Devium, and Epicentral at the launch event next week as well, so we have some great support already.”

About Startup Colorado Springs

Founded in November 2011 by Jan Horsfall, Nick Lee, Ian Lee, Chris Franz, and John Stewart, Startup Colorado Springs exists for the express purpose of supporting local entrepreneurs in a non-political/non-government setting. As an offshoot of Startup America® and Startup Colorado™, Startup Colorado Springs has three goals:

  1. Provide valuable resources and connections to help young companies grow.
  2. Support the local startup ecosystem in Colorado Springs.
  3. Recognize startups as the drivers of our local, regional, and national economy and their founders as true American heroes.

For more information and to sign up for the email list, visit www.startupcoloradosprings.com.

###

Mar
02

    As our early stage companies move into springtime 2012, it’s time to take an honest look at our status as entrepreneurial, revolutionary companies and make some decisions about how we’re going to move through what remains of this crusty recession. In so many ways, 2011 was a year of renewal for many early stage companies. Though the light at the end of Downturn Tunnel  didn’t hit our eyes until late in the year, it was good to know that we were moving forward with a slight wind at our collective backs instead of the unwelcome breeze that’s been blowing in our faces since late 2008. And from here the breeze just gets stronger behind us.

Next Wednesday I’ll be getting together with Vic Ahmed (CEO, Business Genetics) and Daniel Epstein (Founder, Unreasonable Institute) – two ‘revolutionaries’ in the truest sense of the word – to discuss where we stand during the “In Growth We Trust Session” in Denver. As part of this work, I shared my thoughts yesterday at the every-other-Thursday Open Coffee Club in Colorado Springs and I thought I’d pass on my thoughts here as well.

First, if you’re judging small business by their collective report card, grades are improving, but little Johnny’s still probably going to get extra chores after bringing this latest update home. Comparing mid-2010 to the end of 2011 across a variety of subjects still means our overall grade-point average is a little better than a C+, but we’re improving across the board:

  • Capital Access / F > D+
  • Marketing & Innovation / D > C
  • Workforce / C > C+
  • Customer Service / B > B+
  • Computer Technology / D+ > B-
  • Compliance / C+ > B
  • Mentoring / C > B-
  • OVERALL / D+ > C+ (1.25 > 2.46)

By far the toughest obstacle for our entrepreneurs continues to be capital access, followed by marketing and optimal use of technology. Still, the many newcos we’re in conversations with are digging in and attacking these issues with a very, very positive frame of mind. They’re also doing it with improving air cover as mentors and entrepreneurship groups are increasingly helping them check the boxes against these issues. Accelerators and incubation in general are on the rise again – as Vic Ahmed’s latest introduction of Plug and Play in Greenwood Village and a soon-to-be-announced Colorado Springs accelerator (with seed money) suggest. Entrepreneurs collectively are moving at a faster speed than a year ago and there seems to be an internally-biased push from entrepreneurs themselves to “get sh*t done” as it relates to these opportunity-based obstacles.

We do have several macro-economic issues which won’t make things easier for us. The global economy is still anemic. Gas prices could hit $5/gallon this summer which will certainly impact those in consumer products and services. Mall vacancy rates are the worst they’ve been to date and the housing market is growing at a snail’s pace as federal intervention continues to get in the way of a faster natural market correction. Corporate profits have been decent, but not awe-inspiring by any stretch. And it certainly doesn’t help that we have a federal administration continuing to confuse and confound most of us in the world of business.

Angel investors – the key to many of these early stage companies – continue to be a fickle lot. Though showing up again and making public appearances, most angel investors continue to be very slow to pull out their wallets. Sadly and inexplicably in more cases than not, they’ve also generally failed miserably when it came to critical add-on, second stage funding. Outside of the Super Angels, we have to get more participation from this group, but don’t expect an upturn for another year or so on this front. It’s just part of the cycle.

On the subject of light at the end of the tunnel. there are a lot of bright spots emerging as we expect at this stage of recovery. The Payroll Tax cut was extended. Interest rates are as low as we’ve ever seen them – which will be good once the lending log jam slowly dissipates. To the extent one can get an SBA Loan, the interest rate is fantastic. Tech investment is up and so is manufacturing investment. Corporate strategic money ($1 trillion has been in the coffers) is continuing to find its way into the market as companies compete with emerging private equity groups to invest in and buy newcos. Venture money is active and the IPO market is waking up. Thus, there is an exit to recovery ahead even though the ride still sucks a bit. Again, just part of the cycle.

Internally, newcos have been busy changing their playbook as these macro-economic shifts start to work in their direction. There’s also been an growing increase in group air cover as entrepreneurs have banded together themselves – outside of those willing to help like TechStars – to use some good old fashioned group think to attack their opportunities. Entities like Startup Colorado and Springs Startup are lead by entrepreneurs themselves, not government or pay-for-play. We’ve seen dramatic traction in participation as this independent push gains more and more followers from within. I’ve been blown away by how many companies there really are up and down the front range of Colorado which were flying under the radar. Now they’re joining these groups to test their ideas and gain a deeper understanding of how to solve their issues quickly and economically. Hit one of PVG’s Five-Minute Pitch Nights in Colorado Springs and you’ll see it in action. We’ve gone from a dozen people back in late August to over 150 at our last event. It’s must see, from-the-inside-out, creative activity.

Further, the idea of The Lean Startup introduced to us by Mr. Ries is prevalent in more and more conversations. Entrepreneurs appreciate the capital markets are still mushy and they’re intent on using a modern sense of process-based frugality to not waste money this time around. First stage ask has dropped from $1 million to as low as $50,000 as entrepreneurs tighten up that first milestone push by an order of magnitude. We’ve been encouraging our entrepreneurial colleagues to gather more and more information about what’s acceptable to those making decisions for the second stage of funding as well, such that they know what they’re trying to do in more exact terms. The purpose of this thinking is for them to be the invited guest at the table when they do show up in front of next round’s benefactor.

We’re seeing a multi-demographic approach to business building as tech-savvy, younger business people partner with boomers and their respective experience relative to sales, marketing, finance and capital. When I myself decided to review C-level positions again about 45 days ago, I had no idea how much this holds true. There are some very rich environments which have the best of these two worlds and they do seem to have more collective confidence and tighter thought processes relative to planning and execution.

The advent of cloud computing has lowered a key cost to doing business and is one of the reasons I give our newcos a better grade for use of technology. Ditto on the usage of social media which has not only dramatically lowered marketing costs for cash-strapped entrepreneurs, but in many cases has actually leveled the playing field to the extent they’ve immersed themselves in creating social media loops which spread the word of their new products and services.

Alternative capital sources continue to enter into these new companies, in part lead by new crowd-funding companies like Kickstarter and CircleUp (being officially announced next month) and Angel-Newco brokerage entities like AngelList and Invertual emerge. We’ve watched with a smirk on our faces as Paul Lizer, CEO of newco Devium raised his requisite seed capital goal of $45k on Kickstarter within 2.5 weeks and is on par to raise around $80k with the effort. More of that please

Hiring is also increasing at a nice pace with Bullhorn reporting that all U.S. geographic regions are demonstrating increases in month-over-month job openings.  In general, small business entrepreneurs are “optimistic” and this shows as they add talent to their staffs as they anticipate the growth cycle coming up shortly.

Finally, this all makes for feel-good TV when you consider that private business valuation increases are also headed in our direction. If you look back at economic cycles over the past 50 years, you’ll see the same pattern emerge in terms of how valuable companies are at the time of exit. Like clockwork, 2008 through 2010 represented a Neutral Market – one in which fewer buyers were present. Banks shut down. Corporate money was locked up. Private equity groups were dealing with breached bank covenants on their leveraged holdings. VC’s were hunkered down working on their companies instead of their own funding. From the beginning of 2011 through 2012, we’re experiencing a Buyer’s Market, one in which all of these investor types begin to emerge as they purposefully have to invest and the target company values are generally lower. The good news? From 2013 through 2018 we’ll enter back into a Seller’s Market (as we did from ’83 – 88, ’93 – ’98 and ’03 – ’08). This means all of our hard work – as investors and newcos – will be on display during the best time frame to create liquidity events.

As we’ve been telling our newco colleagues, right now stay focused on building a great business. We’ve been through both sides of the hurricane’s eye and we’re about to hit some really nice weather and some really smooth water. Timing is on our side. Oh – and by all means – “In Growth We Trust!”

– Jan

Jan
29

  Through Startup Colorado we’re doing some pretty cool stuff. In fact, some of the adventures coming out of this program are so cool that I’m jealous I’m not a student with this opportunity in front of me (skip the tests – just give me this stuff!).

Our partners in stunningly beautiful Boulder, Colorado are piloting a program that we eventually want to caste into Colorado Springs, Denver and Fort Collins based upon what we learn initially. So they’re looking for Colorado’s most dedicated, driven and aspiring young entrepreneurs to participate in a sweet summer program offering the opportunity to (a) work as a paid intern for a Boulder/Denver startup and to (b) attend a variety of evening  and weekly events, including a weekly seminar series on entrepreneurship. This isn’t some moribund internship where they use you as a coffee courier (okay – they might ask you to grab a couple of lattés), but rather an immersive, interactive, ass-kicking internship. Talk about getting yourself ready to rock upon graduation …

Startup Summer offers:

  • A paid ten-week internship with a Boulder/Denver startup; the internship will include frequent interaction with the company founders and management team;
  • The Startup Summer Seminar Series featuring prominent entrepreneurs teaching classes on entrepreneurship;
  • A weekly social event with business leaders in the community;
  • A close-knit community with your peers in Startup Summer through group housing in Boulder;
  • An end-of-summer competition with an opportunity to win mentorship from some of Boulder’s finest entrepreneurs and investors!

We are looking for interns that understand the value of this experience and are willing to immerse themselves in this summer program. To be accepted into Startup Summer, you should:

  • Be a rising sophomore, junior or senior actively enrolled in a four-year program in Colorado
  • Have an academic focus in business, engineering, or computer science (preferred but not required)
  • Produce two letters of reference
  • Have a drive for entrepreneurship and innovation in business and technology
  • Have a business idea at any stage of development
  • Be willing to live together in Startup Summer group housing

Sign up (here) and have a blast this summer – all while building your resume, getting smarter and getting seriously connected! (and if you’re just a jealous older entrepreneur like me – pass this on to another young whippersnapper).

– Jan

Jan
20

   We had an incredible meeting yesterday in beautiful downtown Colorado Springs with about two dozen entrepreneurs who are trying to do some incredible things. Take for instance, Devium, the maker of an amazing new smart phone application for your automotive dashboard. Their founder, Paul Lizer, has created an amazing device which essentially throws your old radio in the garbage can in exchange for a car radio driven by all of the best apps that one can utilize when it comes to music (Spotify, Slacker, Ocarina, Last FM, Pandora, et al). The kicker? You simply plug your phone into the Devium device and all of these modern music apps are at your finger tips – without the cords and hassle we all deal with. I’ve personally moved fully into the cloud-based music space via Spotify Premium, but it’s a major league hassle using my phone as a radio in my car given the charging wire and transmission wire. Given the average car is now nearly twelve years old, the OEMs won’t save us on this one. This product is the right product at the right time for millions of people.

Paul is one of the guys who has come out of the woodwork here in Colorado via Springs Startupwe have hundreds of amazing newcos sitting here on the Front Range – and it’s critical that as an ecosystem we don’t let him fall back from optimizing his company because he doesn’t have the access or understanding to get the rest of his stuff right. I’m convinced that even six months ago he would have been heading for a storm, given this area’s inability to financially feed and nurture its young start ups (see my earlier blog, The Power of Angel Investment). Amazingly, the spirit and intensity of a growing group of Colorado entrepreneurs will keep that from happening this time around.

You see, instead of waiting for the ‘faux and few’ in our local investment community to essentially tear the shirt off his back, as a group of entrepreneurs we’re banding together to find Paul the assets he needs to succeed without letting him wander into the local valley of the lost. Like the internet community which rose up and shot down SOPA and PIPA with a sense of purpose and numbers, we’re banding together as a band of new companies to make sure we get companies like Devium funded and expanded. We’re not waiting for anybody and we’re not going to do the things the way we used to – we’re going to do things together.

Too many times, we think local when it comes to our ideas and inventions. Today, that’s both good and bad. It’s definitely good if you’re hooking into the power of a group of newcos who aren’t in the mood to wait around for local funding. It’s bad if you think that the big money in your community is there to fund and support start ups. Sorry – the vast majority of the time it’s not.

To be fair, our newcos have to do their job as well and we haven’t always been as ready as we need to be to exploit our ideas via funding and expansion. We’ve spent a lot of time as of late finding great lawyers who will help our area entrepreneurs without fleecing their pocketbooks. Folks like Ben Sparks from Sparks Willson are now our go-to counsel for any legal issues our newcos face (company formation, patents, term sheets). Not only will I be willing to bet that Ben will make a lot of money – eventually – for his pay-it-forward mentality, but he represents what’s great about our approach: the best service providers will get our business and those merely waiting to overcharge a newco for term sheet work won’t ever see their faces. Mark one up for group protection.

Similarly, we’ve been looking for individuals and entities who can fill the gap in financial work, manufacturing assistance and prototyping and we’re not fooling around. Those willing to help will become part of tomorrow’s Front Range – teeming with business opportunities and results and driven by the innovation we all possess and want to revolutionize. Those unwilling to put forward an effort to help these newcos simply aren’t going to be part of a growing movement of entrepreneurs (no government entities; no fake investors; no more shirtless newcos).

As well, we’ve adopted a lot of the precepts of The Lean Startup thinking as a group. Peter Skalla, CEO of Qbillion, has showered our group with an intense understanding of how to preserve our capital through this thinking so that when we do get funding we’re fully aligned with the idea of a milestone-based approach which doesn’t waste “80% of our invested capital” according to author Eric Ries. I’m pretty sure every single person associated with Springs Startup is either reading this fantastic book or is in the process of reading it.

The goal is not to let any of our great ideas die for reasons we’ve all collectively experienced: bad term sheets; poor accounting principles; faux angels; wasteful spending. And this thinking is now taking hold. 

Yesterday, Paul provided an example of this new group thinking and it really hit me like a ton of bricks as it unfolded. As I’ve said in the past, the only difference between a rut and a grave is the depth. Formerly, we’d have sent him to visit our local set of government-based acronyms – all trying their best – in order to get the help he needed. And we’d never hear from him again. These entities don’t understand the culture of entrepreneurship (see Entrepreneurial Reverb) and they waste vast amounts of time and energy given the lack of impact via results we’ve not seen historically.

This time around – with a band of supportive entrepreneurs which is growing at an incredible rate of speed over the last six months – we all made sure he didn’t fall for the bullsh*t. He needed manufacturing contacts and we had a half dozen real contacts in his hand by the end of the day. He needs legal help and we have him on his way to the people that will help him – not rip him off. And we’re tying him into a set of investment sources which only fractionally depends on investment conversations with our traditional angel network – which unfortunately and historically hasn’t got the job done. And he’s probably reading The Lean Startup as we speak.

I’d urge community-based entrepreneurs to shore up their ranks – increase that network density via meetups, coffee sessions and pitch nights – and open yourself up within a group mentality to do bigger and better things than your community would normally allow. You’ll meet great friends. You’ll grow your companies. You’ll change the world.

Power to the People!

– Jan

Dec
28

  I’ve been discussing a lot of different opportunities with new VC-backed companies as of late – including discussions around CEO and CMO roles – and I couldn’t help but make a quick observation: some new companies really understand what’s required to get to the next level of success and what the overall ladder of funding really looks like – and most clearly don’t. What’s worse is that many of the current leaders in these companies really don’t have a good sense for how far along their company is in the greater scheme of successful expansion and they lack focus in terms of what’s required next.

It’s been said that our greatest strength is our greatest weakness. Let’s add ‘over enthusiasm’ to the strength list for most entrepreneurs. It drives them to go out and invent and ideate and eventually create new companies to begin with. It also works against the notion of being realistic in terms of what the company has really accomplished and where it’s at in the overall gestation model for a successful enterprise. The best metaphor I can think of when I envision a company going from the formation of a new product or service idea to becoming a great company with liquidity opportunities is the minor league system which feeds Major League Baseball (MLB).

Rife with promise, newcos get started in Rookie League or Class A – depending on how mature and historically successful the executives are inside of the company. You’ve got something going for you – product idea or solid batting average – and you look like a baseball team with some measurable degree of talent. You’re adding bodies to make your team look like it belongs, despite the fact that many of them are inexperienced and in some cases literally immature. As a player, moving up means you have to understand what you do best and that’s relatively easy given that you’re in the minors to begin with. Usually a good product idea and basic management team will get you some initial start up funding. Like the minor league system, there are plenty more positions than exist in the Majors, so being alive at this stage doesn’t mean you’re heading to the Majors, but it means you’ve met a prerequisite in order to hopefully do so.

There are over 8,000 players in the minor leagues – only 750 of whom will ever make it to the major leagues. Given that eventually veterans take down major league rosters to a large extent, the reality is that it takes over 30,000 minor league baseball players to fill those 750 major league roster spots. Herein lies part of the problem: each of those 30,000+ players think they’re headed toward MLB, but only around 2.5% will actually get to play even one game at the senior level. To quote Crash Davis (Kevin Costner) in the movie Bull Durham, “Yeah, I was in The Show. I was in The Show for twenty-one days once.” Not only is it incredibly hard to get there, but it’s even harder to stick around for many players.

Like the teams you see in Class AA, individuals who move up from Rookie League/Class A ball understand that the talent level overall is definitely more intense and more rigorous. Still, just making it from A ball to AA ball only moves you into the top 96% of all players in organized baseball. In other words, you still have a loooooong way to go to The Show. Herein lies my observation. Too many newcos are sitting in Class AA thinking they’re ready for MLB with (a) the team they have; (b) the talent they possess cumulatively; and (c) the financial backing they’ve been fortunate to accumulate. Newsflash: over 80% of all venture-backed companies will either be average or out of business in a few years – despite the venture capital backing. Not all that different than the player in Class AA trying to make it into the lineup with a MLB club. Like a drafted college player in Class AA, you have a lot to be proud of – but you’re not in the Majors. You’re still in Class AA and  you still haven’t learned to really hit a low-hanging curve. You have very basic and very intense work to do on (a) your product or service; and (b) additional talent needs. There’s a reason great CEO’s spend up to 40% of their time ‘hiring’ in a typical VC-backed entity.

Still, major league scouts understand that the best prospects to make it all the way to the top have the talent which is improving and the prospect understands what they need to do next in order to progress. The best prospects are humbled by the opportunity: they know they have a long way to go and they’re looking for the help they need to get there. They’re openly appreciative that they haven’t arrived (we’ve all heard it: “… I’m just coming out each day working as hard as I can to get better …”).

I’ve had the opportunity to discuss leadership roles with several of these companies as noted and in many ways I feel like the talent scout evaluating a player’s current status. And the differences in the companies I’ve met couldn’t be more … different.

I’ve met companies with weak leadership and passive-aggressive tendencies (kiss of death #1). One COO who had never built a complete company had the gall to tell me – all why his company is openly seeking a CMO – that “(they’re) already pretty f*cking good at what (they) do.” All it took was a quick cursory review of their marketing tactics to understand they weren’t as  good as they thought they were. I was amazed at the attitude in light of the basic facts within a smallish 30-person organization. Not surprisingly, the attitude already seemed to permeate what could have been an up-and-coming organization. Serious buzz kill.

Jim Collins suggests that true leaders have a certain humbleness, but also a tenacity for surrounding themselves with great people of character. In over half of my conversations, not only did the conversation not focus on character or talent upgrades, but veered ridiculously far into their versions of things like ‘company culture’ (kiss of death #2). We built Lycos from six people to 1,300 people by the time we successfully sold it and the culture was a byproduct of our success, not a byproduct of whether or not our personalities matched when we were a small firm. In other words, work on hitting the hanging curve – not on making sure you all have color-matching wrist bands to go with your minor league uniforms. The goal is not to stay in the minor leagues and be like every other minor leaguer. At Lycos, if we’d have sat around looking for a perfect personality match when we started out with six people instead of bringing in talented people with character who could hit the cover off the ball and close ballgames, we wouldn’t have sold the company for $7.5 billion. Bluntly, successful companies breed great company culture because they hire multidimensional people with good character who eventually focus on aligning the success metrics of the organization with the actual execution and business operations. This is what allows all types of people to bust out creatively and productively. It’s amazing how much fun it is to work for a successful, well-aligned company of character versus a company in trouble proclaiming they have perfect company culture.

So the winners in my search – and eventually one of the companies I’ll be spending my time with – are those who (a) want to talk about the business and the revenue streams; (b) understand what their board expects; and (c) are focused on bringing their talent level up via people of high character in order to become a great company. Yes, by definition culture matters. Nobody who is talented will spend very much time with a bunch of jerks when there’s a lot of great, fun companies out there. But this isn’t The Dating Game. This is still a hard-working, intense game of productivity and expansion and the culture will either get better because you succeed or degrade because you don’t. Just because you all like to knit doesn’t mean you’ll be successful. It only means you all like to knit. The factors in business are far more wide-ranging and get more complex as the company grows up. You need left brain and right brain thinking from different parties, lest the company simply stalls. Frankly, some of the best people I’ve worked with in my life weren’t exactly my best friends nor did they even began to care about the things I really enjoy in my life – but they were uber competent and they were positively and ethically focused on the mission at hand. That made them perfect teammates in my estimation. The occasional club house fight didn’t detract from the fact that eventually we had a winning team and we were all focused on the goal of winning the whole thing. That made for great culture.

Newcos need to appreciate that they have a long, long way to go to get to The Show. Either get better in each and every one of those key areas by bringing in long-ball hitters who can get it done, or relegate yourselves to enjoying fast food and the long bus ride to the next minor league stadium. Remember, very few make it to The Show. Appreciating that being venture backed is a great start, the companies which are going to going to be great understand they have two to four more capital events which they’ll have to get through en route to the Fall Classic. Just this basic appreciation is a great place to start when you’re upping your talent levels.

– Jan

Dec
13

I had one of the more enjoyable board sessions I’ve had in a long time last night on the 11th floor of the 1st Bank Building in beautiful Colorado Springs.  Spectware, with founders Eric (CEO) and Tabitha (CFO) Skinner, were updating us on their rapidly growing business as a SAS platform for crane management (which eventually will lead to broader verticals in heavy equipment management). We also had on hand the coolest thing ever added to a board session: their brand new baby girl. Let’s just say the entire family is committed – and in reverence to the meeting, ‘Lil Skinner never uttered a peep.

The thing that struck me about the meeting and the subsequent follow up is the same feeling I get when I see people committed to their health: uptick in speed; plan simplicity; tight execution; focused on the priorities necessary. While the structure of the meeting mimicked a lot of start up board sessions (re: all young entrepreneurs with a board should read Major Henry M. Robert’s completely revised edition on the topic of Parliamentary Procedure aptly titled “Robert’s Rules of Order”), the outcome was representative of what’s required of a lot of modern, under-resourced, seed-stage companies like Spectware. In fact, even though the company’s small, each time we finish with these sessions I get the sense they shed their skin and move forward faster, tighter, focused.

Part of what we need to remind ourselves of as board members – especially with start ups, is that we’re there to help the company. Too many times, I see this exercise turn into (a) board members who can’t help themselves from beating on the start up at every turn (read: not helpful); (b) board members who don’t do their homework; (c) board members who become complacent; and (d) board members who don’t do much more than cover their ass. In Spectware’s case, we don’t have any of that as far as I can tell. The board is there to help the company. Part I of the equation.

And the second part of the equation involves what I love about Spectware – and it’s a lesson for all young companies – in that they constantly remind us as a board that they love to listen and they expect us to be helpful and committed to providing direction (hence the term “Directors”). So while the board process itself is still a work in progress and an education for Eric, the outcome of this past session shows why Spectware is going to win. The flurry of emails this morning – and subsequent phone calls ‘around the horn’ – show that not only does our board want to help down to a one, but that the Skinners are listeners – and doers. The issues we identified late last night are already being filed down with a passionate set of next steps in the areas of revenue generation, brand positioning, capital raising and overall industry thought leadership (Eric’s going to be on the cover of the #1 selling crane publication later this month). Everybody – each board member and each employee – has a set of clear deliverables which when executed will again allow the company to molt its skin before moving on – sleeker, faster – with a refreshed set of next steps.

So instead of looking at the monthly board session as a necessary evil, look at these sessions – with commitment up front from all parties – as refreshment for the company. Stop – think – refresh. Then go back to the Startup WorkoutFast, Simple, Tight, Focused.

Dec
06

  I’ve been devouring current marketing thought processes related to seed-based start ups over the past few days and I’ve come to one conclusion: people are more confused than ever. Really confused. And as happens, the confused are making other people confused as well. Stop the madness. Please.

The tension is built on two axes: new media formats which allow for a supercharged direct marketing effort and traditional marketing formats which are heavier on traditional media vehicles.

The reason I say that people are more confused than ever is because certain thought leaders brilliant in many things – but who frankly don’t know jack sh*t about marketing as a true revenue and demand driver – choose to be overly provocative by suggesting that somehow things have changed so much in 10 years that all of the old marketing tactics are nothing more than old, yellowed photos and are now unnecessary. Ditto for the marketing leaders who don’t lead anymore. On the former I couldn’t disagree more vehemently (sorry, the basic ideas of positioning and impressions still matter). On the latter I couldn’t agree more completely (either keep up or fade away).

But it has NOTHING to do with marketing per se and its role in a start up company.

Just like engineers, developers, CFOs, customer service reps, and sales people have been introduced to plenty of new apps and methods by which their vocations have changed, so have great marketers. Can you imagine a modern sales leader not having an ass-kicking CRM solution – and one sitting on the Cloud?. The reality is that the great marketers – just like the great folks in these other vocations – either adapt by integrating the new methods/tactics with the stuff that’s worked for them in the past – or they simply become less than excellent.

So the issue to me isn’t so much about “Marketing Works” versus “Marketing Sucks” – or even “Marketing is Unnecessary in Startups” (Ugh) – it’s about being a great vocational leader by adapting to the times and understanding how to utilize the new tactics – the demand generation pallet if you will – which allows us to be so much more efficient than we used to be. Further, some have promoted the hipster idea that thought leadership is in and of itself a marketing strategy and replaces the old marketing activities. It’s not and it doesn’t. It’s just another marketing tactic, not a strategy or marketing plan in and of itself.

While running the marketing unit at Valvoline in the mid-90’s, we utilized $30M of TV, $10M of Radio, and $5M of Print – and some direct tossed in as the internet was coming our way. By the time I was done with my marketing leadership at Lycos in 2000, the mix had crossed over into more digital advertising and direct marketing, though the holy grail of ‘marketing to one’ was still not perfect. At Turbine in 2010, we crossed over into a budget which was heavy on the ‘funnel’ of digital acquisition – wholly integrated into social media and community – and we actually had a digital ad model which worked amazingly: the LTV of every ‘free’ Dungeons and Dragons or Lord of the Rings gamer coming through our doors was $8; Net income was $6 after tech costs; and we never paid over 90 cents to get them into the funnel. Holy grail arrived (which is why Warner bought the company).

So did we abandon old marketing methods completely because they weren’t hip enough? Of course not. We could blast open the top of the acquisition funnel by adding in a strong run of TV strategically placed and the results bore this out (even with the TIVO impact). Site wraps on key gaming sites boosted the acquisition numbers big time as well. When Warner bought Turbine, their penchant for TV kicked in and they supplemented the digital acquisition play even more and drove the hell out of the profitability for the games and the company they purchased.

So when I hear simple axioms which play more to the provocative sense than anything constructive for young companies, it chaps me because it really fails to mention the real issue: are you a modern marketer or have you failed to keep up with the tactics and methods now available to you as a demand generator?

You’re either with it or you’re old fashioned. In business, the latter is death. And it doesn’t matter if you’re talking marketing, sales or finance. Modern thinking wins – luddites say goodbye.

Finally, it’s worth noting that in the mid-1990’s at Valvoline we went from the #5 spot to the #1/#2 market share position; at Lycos we surpassed Yahoo’s web traffic and had 17 straight quarters of exceeding the streets expectations for sales and profits; and at Turbine we rattled off 16 straight months of revenue growth in a flummoxed game industry, leading up to a very successful company sale. In each case we utilized an integrated mix of old and new tactics to drive the revenue line at a faster pace than our competitors. In the end, that’s what marketing really is and nothing more: creating a positive ROI for the marketing and ad dollars using the best mix of tactics available to you as a revenue driver – which is what marketers are.

So to the thought leaders who objectively shouldn’t be thought leaders on this one: quit confusing people!  Sales doesn’t beget marketing even with the best product in the world. To the extent it appears that’s happening, it’s only because you didn’t understand how to get an excellent marketing leader on board who could have made those sales statistics look better by another order of magnitude.

I’ll call that a huge sin of omission. Maybe you should see if your hiring practices are still being lead by somebody who doesn’t understand that times have changed.

– Jan

Nov
29

  I’m so excited about the effect that Startup Colorado has already had in Colorado Springs. Thanks to the amazing folks in Boulder – including our friends at Foundry Group and CU – we’re now fanning the flame of rapidly increasing entrepreneurial interest. Here’s to a grass fire!

This week, Ian Lee, along with the gang at Ian’s company, Tins.ly, plowed ahead to get two new entrepreneurial events on the calendar full time.

Open Coffee Club:

Taking place on the first and third Thursday of every month from 7:30-9:30am at Pikes Perk on 14 SouthTejon Street, we’ll combine networking and caffeine to help entrepreneurs in the Colorado Springs area.  In addition, a local expert will lead an informal discussion covering a topic related to startup businesses and entrepreneurship.  Our first meeting will take place on December 1st – this Thursday – and will feature yours truly leading a discussion covering topics ranging from Startup Colorado to the love of all things entrepreneurial and how to create network density in Colorado as a whole and Colorado Springs specifically.

Startup Cheers:

Taking place on the second and fourth Thursdays of every month from 5:00-7:00pm at the V-bar on 19 East Kiowa Street, we appreciate that entrepreneurs need entrepreneurs and that companies form from comrades, partners, & friends. So what better way to foster these friendships then by socializing in a casual environment with like-minded people?  The very first event will take place on December 8th.

I urge you all to join us as we create a deeper network of understanding by coming to these events and bookmarking this site which will continue to highlight the newer additions as we bring them online for the folks in G.I. Village: Springs Startup!

I want to personally thank Ian Lee, Nick Lee and John Stewart – along with Chris Franz – for their support of these fantastic additions to our newco culture here in southern Colorado!

– Jan