TP's Topics

Startup CEO Playbook

I just talked to a bunch of my friends who are all startup CEO’s and here are a few of the themes that came out of our conversations.  These lessons are related to the early days of managing a startup and about creating a culture that will have the greatest chance of productivity.….

• Hire hungry ambitious people who will make the personal sacrifices required to make it happen.
• Set up a reward system that’s not just money and stock but all those things that people want for a fulfilled career experience 
• Hire smart people….can’t teach smart….
• Avoid hiring people with lofty titles unless they love getting their hands dirty, and view “working for results in compressed business cycles” as a life-choice.
• Get in the weeds and know what everybody is working on and how it relates to your business model.
• Tell the organization what it’s not going to do. 
• Give the board and your employees a clear plan of what you are going to do even if you are not 100% confident… a direction is better than no direction
• Do everything you can do to increase your understanding of things you don’t understand after a plan is laid before the company and the board
• Hold people accountable to specific deliverables on that plan to a delivery date 
• Give feedback directly good and bad to employees about their performance but with empathy and a major concern for results. 
• Consistently relate their work back to the direct impact it has on the business 
• A CEO should have a personal relationship with everyone in the company especially if you are fewer than 30 people… Find the time
• Don’t expect anyone to do anything that you won’t do 
• Little Things matter…For instance, never let them go thirsty…it’s a signal you care... 
• End working relationships with people quickly who don’t subscribe to the organization’s value system
• Don't tolerate people that continuously give you excuses
• Reward people well that continuously deliver and exhibit the values of the organization.  
• Give people authority…make it clear…don’t create a blackhole for people to figure out who’s in charge
• Be available all the time….
• Let people take smart thought out risks and pat them in the back for trying. 
• Don’t hire an FTE until you’ve proven you need it.  Bootstrap into it.    
• Watch the Money….seriously….don’t get caught up in the hype and do extravagant things that you don’t need to….average, clean office spaces work.  Reward the org with a little more when you’ve proven something to the business community 
• Be clear on what you want and what you expect of the whole organization... Don’t let people guess.  Be Consistent. 
• Don’t hire advisors who are only your buddies, hire advisors that are going to really help you because they know something you don’t. Don’t waste that resource or don’t sign it up.     
• Have Fun.  Once you overcome fear and ego, you see things very clearly for what they are.  We have never had greater opportunities to dare to try something no one else has done before.
• Reflect on yourself for personal growth in this moment where you get to create something special.  Life is too short. Embrace it.... 

Crossing the Chasm 2.0

I just went to a presentation last night by Geoffrey Moore... It was a nice event held at pacbell park sponsored by some of the folks from HRJ capital..

Geoff was talking about his new book and how crossing the chasm needed to evolve into some of the new business models...as crossing the chasm 1.0 was based on an older manufacturing paradigm..

The 4 major topics of discussion were.....

Crossing the chasm in a belly of a whale: discussion centered around how you take entreprenurial businesses and move them through large companies like Cisco without crushing them...The prescription was basically....untether them from the rest of the organization, get entreprenurial folks from inside your organization,  make it temporary so they fold back in once they've reached scale... there were not many cases of successful execution of this 

Reinventing Healthcare:  that creating new drugs is basically a negative ROI game and that the healthcare is about focusing on making the other parts of healthcare more efficient.... The real innovation is around....prevention for things like (diabetes, stroke testing), accurate delivery of drugs (delivery systems), measuring health on a daily basis through small chips that track your vitals...

Alternative Energy: that its early in the game entreprenurially and that the the demand is frightening. See India and China....So move fast and you should do well as the big guns have not gotten around to this area yet....This area has the biggest technological risk.  For example, to create alternative fuel we are trying to do things like training bugs to eat stuff and create fuel via their endocrine systems......not pretty... 

Web 2.0 :  Now Mr. Moore was defining Web 2.0 as businesses where exponential growth was required or there is no opportunity. He also suggested all of these businessed that have been successful have a cool factor.  Om Malik and Geoffrey Moore debated that the none of these cool Web 2.0 companies with exponential growth has a business model.  There was also argument that advertising via google was becoming so efficient and that the biggest issue was that there was no capacity left as demand outstripped supply. The repercussions were essentially that these properties would be suppressed down to a worthless page view cpm once google bought up all the inventory.   

My takeaway was the web 2.0 part of the conversation of was the most in need of work.

I think we are all having a bit of an issue generalizing what Web 2.0 is.  I've heard many different definitions:

Web 2.0 has been defined as :

* the general age of innovation we are in

* a set of cool tools , technologies and features applied against new Web sites (example ajax)

* a certain type of business that is predicated on user interactivity and the creation of user generated content (example facebook) 

* new applications of the Web that leveraging the deep content of the Web to start to answer people's questions and make their life easier (example farecast)

or it could be a combination of all of these things.   Personally, I think that the way to think about Web 2.0 is from the consumer standpoint:

Are things going to be created that :

* Providing with something completely different than I already am getting (i.e. using facebook and efficiently keeping in touch with many people)

and/or

* Providing me with an incredibly more efficient way to consume information ( farecast, knowing you are going to get the lowest price and its integrated into your personal/work travel life) 

The web 2.0 phenomenon is about innovation in creating large and very specific quantities of data that have not existed before from the population(or population representatives) versus the creation of this from business employees.  There are many, many new and vertically focused social media engines (blogs, vertical communities, discussion boards, commenting) that are only growing in scale..   

The next phase of innovation in Web 2.0 is about creating applications that leverage the growing amounts of content by mining it and delivering it in newer and novel ways that makes people lives easier. The potential opportunity is there because the web's content has just been made more comprehensive and can now be mined to truly answer people's questions.  I don't think businesses in this next phase of innovation are going to require exponential growth...it's going to be nailing the consumer value proposition and then creating well thought uses of all this new content.  This will drive up the economic value that can be recieved because of the novelty of the solution delivered and remove the need for exponential growth.   There will be a new wave of interesting business that we will see come forth over the next few years.   As Bryan Adams sang  "I'm Ready"....   

 

Search or Something Like It

I’ve recently had a chance to present at both the TechCrunch Supernova Conference and the Under the Radar DealMaker Media Conference.   These events were both well attended and it was very interesting presenting with a number of the other young “hot” companies in the space.  The perspective of what’s hot now versus what is not as hot was very interesting to me….  It’s just incredible how these cool company "waves" flow through the venture capital community too.  It seems like there is a hot window where all the firms may fund a particularly type of company, place their bets, and the move on to the next segment of companies.  I’ll share some perspective I’ve noticed from the recent trends in the conferences and the space in general   

What’s hot in 2007

• Video Advertising Networks
• Wireless Consumer Applications
• Discovery Technology for Products and Music and Media
• Social Commerce and Review Information

There was also a lot of discussion over Search. Was it over?   Has Google won?  We all know that they are moving with incredible momentum but there has to be more.  The only high profile new company really trying to take them on right now was Powerset with a natural language processing capability.  There are also a few human powered search engines but it seems like they are running or will run into scalability problems very soon.   

There was also some conversation about “Vertical Search” or “A Search Engine that is focused on a Specific Category”. We know of a few companies that have come in and tried to create a search engine incrementally better than Google in serving up links in a specific category.  The bottom line as I’ve written before is that if it’s only slightly better it will never get a user’s attention. These vertical search engines have only seen moderate growth.   

So can general search get better? From my perspective, the answer is yes but the fruitful space to hunt is not on serving people better links.  It’s about using the Web’s Data to answer people’s questions. We are building Wize.com as a Web site that provides unique content and utilities to consumers.  Our WizeRank is a product satisfaction score based on what the world is saying about a product.  This information is unique and gives people an answer to a question rather than more pages to research.  Isn’t that what people want?  People want quick answers that improve their lives and give them more time to do other things. Wize is progressing down a path now focusing on improving the online product research process. Online Product Research will impact 1 trillion in commerce over the next 4 years in the

US

alone. 

I believe strongly that a large component of the future of search will be about improvement to the way pages are served up but by adding rich data that answers people’s question on top of the Search Links that you provide.  Search should be about doing people’s work for them rather than asking them to do more work

The Power of Integration

This entry is certainly not about differential equations.  I remember my last test in differential equations in engineering school.   It was one rather large question.  It looked like something that Captain Nemo was battling in the movie “20,000 leagues under the sea”.  It was big, it was ugly and it had tentacles coming out of it.  Like the good captain, I slugged through that beast to fight another day but not without it taking its toll on me and leaving a lasting impression on what the word integration meant……….

Well, I can’t believe that I’d be talking about integration again but I am going to write a little about this concept that I am fascinated with.  This concept applies directly to people and it’s really about reaching potential in one’s life but it applies very directly to a high performing workplace.   It’s called the Path to Integration.

There is an excellent book called Personality Types by Donald Riso.  It essentially lays out the detail of a psychology concept called the Enneagram.   The Enneagram is a 9 sided shape that is symbolic of the 9 personality types that exist among us.

While I couldn’t possibly do justice to the concept in my Blog’s short space, I’ll basically lay out the principles:

• Through our genetics and early socialization, we are pre-disposed to have a particular personality profile.
• This tends to lead us to life choices particularly work roles that we have aptitude for.
• These personality types come with unique strengths but will also be attached to unique weaknesses
• As we progress through life, we continually move back and forth through points of disintegration (the negative) and points of integration (the positive).
• When we are in our top level of integration, we are capable of truly amazing impacts with our work, with people, and with our life. 

So how does this apply to a startup? 

Well, what’s truly amazing is that a good healthy startup has almost every personality profile in a specific functional role.  In other words your personality profile predisposes you to be good at something.  Have you ever had that problem, where you try and take the smart guy or gal and put them into a new role because you are missing someone?  Smart folks can make it work for awhile but if their personality profile doesn’t get energy from the work, it soon drains them.  Of course, there are different folks, that are capable of moving from role to role around the organization but they may be looking for different types of energy from the role.  For example, by placing a great leader who is not creative in the head of marketing role, you may have a well run department but they will most likely not be one who invents or steers the innovative marketing campaign.  They get energy from the leadership aspects and that’s where they will most likely focus and nurture their attention.    

So where does integration come in? 

So the concept of integration simply states that people are in a high performance spot where they believe in what they are doing, they are in alignment of service to the cause and there is absence/minimization of self aggrandizement in why they are doing it.

This is not to say that a startup can’t be successful without being fully integrated.  But early businesses tend to have the key folks in the organization in the right roles for their personality, and have great alignment or great belief in the cause.

When this happens, their natural talents they have take over and work starts to become easier and momentum continues to build. 

While there are startups that do well sometimes when there is large amount of self aggrandizement as a value, people reach integration inside organizations more when they believe their efforts have an honorable purpose.  Self Aggrandizement is typically a temporary feeling than a long lasting foundational value.   .   

Getting to the integration point is the challenge…..my belief is that it starts at the top with the leader focused on how the business serves its customers. 

It then follows with looking for hires that are talented but will not compromise the organization’s potential for reaching a high integration state.  The biggest mistakes I have made in hiring in previous positions have been hiring people that are extremely talented but have a history of disintegrating or going to the more negative side of their personality type no matter what the values of the organization.  There is a high level of correlation with insecurities manifesting themselves in these individuals.  There are also people who are not the right fit because business causes are not a priority for them at all.  These folks are few and far between but they tend to look at business endeavors as something they have to do rather than something they want to do.  

After you start with hires with greater potential for integration, an organization should work to create a value system that helps people understand the true value of the cause.  And then, of course, to work at rewarding and nurturing people for the getting to their highest level of performance which is what we call the Power of Integration.   

The 3 Culprits

So I have been asked a few times;  What's the most important thing to do for a startup to be successful? 

It's a great question and there are probably a lot more folks out there better suited than myself to answer it.  However, in this great country of ours, I guess we all get an opinion.   

I remember being back at business school and deciding to go over to the MIT Campus.  They had an entrepreneur presentation back in the mid 90's which was more rare than you could imagine.

The speech concluded with a statement that all things being equal, 3 things typically kill startups (the 3 Culprits):

* Ego Founder

* Running out of Cash

* Lack of Focus 

It's not like these items aren't interrelated.  We can talk about their relationships to each other for a few paragraphs but if you look at them again there is a nice clustering effect of subordinate issues that allows them to remain distinct units.   So let's explore them: 

Ego Founder: 

As I peer around the valley and look at different companies,  I see this problem happen continuously.  It's kind of a blessing/curse dilemma with regards to founders.   It's that same passion, single minded vision and emotional attachment that drives an entrepreneur to take great risks and to get an organization going that can also blind them with regards to seeding control/authority when the time is right.  There is a relationship between the degree of ego, the experience of the founder, and the stage of an organization that has a big impact on whether a company will get over a critical hurdle. Many founders continue to hang on and desire so much to be right about things that the potential for an organization is many times inhibited if it can not be addressed.   

Running out of Cash: 

This seems pretty straightforward as we all know "Cash is King".  One of the keys is to be mindful of your expenses early on...every little bit.   An organization with loose controls early on will be a bigger organization with loose controls later.  CEO's that don't create processes early on to protect the cheese will be organizations that need more cash faster than required plain and simple.  The other piece is to be mindful to your funding environment.  Be judicious of what you raise but don't be greedy. So many companies obsess about the amount of ownership they are giving up but the mantra holds true "If you can raise it, raise it".  And of course, the last part of this is ensuring that you are spending it on the strategic things.  Focus on things that matter like great people who build great stuff which roles into the next culprit...

Lack of Focus: 

In my mind, this is the most important thing to protect against.  Small companies are by definition small with limited personnel.  Most of the time we compete against rather larger firms.  Just a few great people with direction and purpose paddling together in unison can do some amazing stuff together.  But getting focused takes work. A few steps every startup organization should practice

* Know your customer

* Define what you want to be to them

* Prioritize like crazy the most important things you will do   

* Set Deadlines and Goals to those priorities

* Remind People Continuously    

* Repeat

Of course, this isn't to say you shouldn't try new things or be creative.  That's the essence of a startup but have context in mind of why you are doing it.  It also doesn't mean that startups won't change business models at some point, almost all do.  From my perspective, the startups that have a chance, take a stance and move methodically and in some focused ordered towards the goal until they have to change (which shouldn't be very often). 

The middle ground is not a fun place to be.  Even Ralph Macchio figured it out....      

Remember in the Karate Kid, Mr. Miagi teaches Daniel-san:  "Man walks down the right side street, OK and then Man walks down left side of street, OK  but then Man walks down the middle... squashed... Just like Grape"

Don't get squashed like a grape......   

Widgets, Widgets...Everywhere

Merriam Webster Definition: 

Widget   

1 : gadget

2 : an unnamed article considered for purposes of hypothetical example

I remember a movie called back to school which starred rodney dangerfield.  The context is that Rodney decides to go back to finish college with his son so he enrolls in all the same classes.  The professor asks Rodney to explain how to build a widget factory and Rodney sarcastically replies  "What's a widget?"  The scene goes on and on but it ends when the professor ,frustrated with rodney, turns to the class and asks " Ok then, now where should we build this widget factory" and Rodney shouts out  "How about fantasyland?"

Well, in our Web 2.0 world,  widgets exist and they are gaining steam as an innovative source of branding and traffic acquisition.  Levers in Web site optimization have been previously focused on the world of Search Engine Marketing(SEM) and  Search Engine Optimization(SEO).  A growing frontier of online marketing is what we'll call Social Media Optimization (SMO).

So what is a widget and how does it relate to SMO?   In the Web 2.0 world, a widget is a online badge, tag or rich visual that comes in different shapes and sizes.  It can have different purposes including:

* Tagging or representing someone's personal identity

* Conveying a lot of unique information into a convenient format

* Inviting the reader to interact with it for amusement or information sharing

So, aren't these just ads?  Well, yes, sort of.  However, the whole purpose of widgets is that the reader chooses to accept and post the widget in their community, blog or forum because it improves their content, or is just plain cool.   

A big aspect of Social Media Optimization is about encouraging the adoption and usage of widgets and there are indeed some very cool ideas out there.   Geoffrey Aarone, one of the founders of Flock, was telling me about a really cool concept of getting a Flock branded Mudvayne widget into the Mudvayne Page of My Space.  People began downloading the badge (because it was cool) and placing it on their own personal spaces.  What a great way to get brand association and to have a low cost link available to go get the Flock Browser.  There are many more great examples of this out there on the Web.  I believe the presence of widgets will continue to grow as the needs for personalization and content creation in our social Web continue to be insatiable....                 

      

What is the (Need Gap) Matrix?

I can't seem to get this one framework out of my head. It comes to me every time someone tells me about a new business opportunity.  Every time that I hear about a new technology and how it is going to change the world, I apply the framework to give me a sense of how great the idea is.  I refer to this framework as the "Need Gap Matrix".

The "Need Gap Matrix" is certainly not my original idea as its been detailed in many business books. What's interesting though is I rarely see it applied to startup ideas.  Need Gap is basically looking graphically at a representation of how important something is versus the current gap in customer satisfaction.  Understanding the relationship of these two variables is at the forefront of understanding how great a customer value proposition you have on your hands.   Idea's that are high in importance and that address a big gap in customer satisfaction have the potential to go a long way.....typically.       

How many times in the valley have we heard about a startup that has some really great technology that is better than the current market leaders? They demonstrate the importance of the business proposition by talking about how many people are already using the incumbent's Web site or Technology. What they forget to do a lot of times is to explain how satisfied or unsatisfied the current customer base is.  Many ideas fail even though the technology is better because the current customers are very happy with the old technology or process.  On the contrary, ideas can also fail if people choose areas where people are currently unsatisfied but that are not very important. The bottom line is that understanding both dimensions as vital information to any new business idea.        

There are also some very easy techniques to define your matrix but they may require a little money, a few tools and a desire and motivation to talk to customers.   When we were working on the www.wize.com idea I started with some 1 on 1 interviews across a strata of people that did product research online.  Our objective was to understand how important they viewed the process of doing product research versus their current gap in satisfaction with it.  We then moved to some professional syndicated research from Forrester and Pew about the surging uses of reviews and the uses of product information before purchase.  After acquiring that information, I ran some very focused Internet research surveys with an online Web site called www.zoomerang.com . I actually had a chance to build the zoomerang product while i was at Markettools so it was great to actually use it as a customer.    Of course, none of the above replaces a good intuitive feel for the market opportunity.  A little organized market research can go a long way though to clarifying the opportunity and answering the very important question........  What is the (Need-Gap) Matrix?   

Wize-ing Up!

I have recently become the CEO of www.wize.com .  I arrive at Wize from my EIR (entrepreneur in residence) position at

Mayfield

. As an EIR, I had a chance to work with some great people and look at some very innovative companies along the way.  The journey from EIR at

Mayfield

to CEO at Wize has been an adventure filled one to say the least. 

So what compelled me to jump out of Mayfield and into Wize.com?

Well, it is interesting.  I actually was working on starting the same business myself before Wize even launched.  As an EIR, I had a chance to go out and talk to all kinds of people, Venture Capitalists, Thought Leaders, Entrepreneurs and of course, Consumers. Throughout all those fabulous meetings and a whole load of traditional analysis, it was apparent to me that it was still too hard to do online product research on the Web. It was too difficult to figure out what to buy in almost every product category.   I remember talking to my father who was trying to decide what computer to buy and I felt like I couldn’t help him unless I put a few hours worth of my own time into the process.   That bothered me…. a lot.  The web was designed to make things easy not hard especially around things like product purchases.  I remember talking with Yogen Dalal at

Mayfield

and he confirmed the big need for an improvement in this space from his vantage point.  Yogen and I agreed that what my father was experiencing was real and it was just too hard to do this type of product research quickly.   

From that point on, I kept waking up everyday with a growing inner voice telling me, that’s it.  Go do it.   

Well, I was in the process of doing it when www.wize.com launched.   I went out to meet Doug Baker the founder and we had a 2 hour conversation and it was one of those weird experiences where you kind of go “Did you read my business plan?” There were so many levels where we agreed about the problem and the solution.  At that point I was sold and I believe Doug was too.  We agreed that we had to go do this…. together.   Well, after that, we had go jump through a considerable amount of hurdles to make everything happen in order that we could join forces.  Well suffice to say, with Bessemer and

Mayfield

now behind us, we embark on an exciting 2007 to dramatically improve the “what to buy” process for everyone.  Our goal is to give powerful intuitive information to consumers that makes them feel smart, helps them make “wize” purchase decisions and hopefully improve their quality of living.   Please try out the site; we’d appreciate all your comments good or bad. Thanks!!!

Web.Next

I am not sure that it is possible to write any more articles debating and defining what web 2.0 is.  People have been labeling the recent era of Web innovation from the New Web to the advent of Web 3.0 in the recent media.

So instead of doing that here, I thought I’d write about some of the current facts in the state of Web Innovation and why it’s still a very rewarding time to start a new company. 

What we know –

• It costs a lot less to start a web business.  Money is no longer a barrier to creating software and putting a Web site up.  I really like Amazon’s recent announcement to provide people with access to “pay by the drink” platform services.  I think as Jeff Bezos put it this is going to accelerate getting ideas into market by leveraging something somebody (Amazon) else does well so you don’t have to.
• ….And there is plenty of money.  The amount required to get customer data on a business is a lot less than it once was. And, yes there are some dumb ideas getting funded right now.  However, it is not as bad a play as in the past since you put a lot less capital at risk.    
• …..And the chances of more Youtube’s being created are not very good. We are in an acquisition market currently.  And mostly for acquisitions of less than 100 million.  The market could open up in a few years but the bottom line probability is against the current state of web innovation creating lots and lots of really big companies.      
• Everyone uses the internet - Broadband penetration is up and the Web is past the lead users and into the wheelhouse of a huge percentage of Americans for daily usage. Intuitive design and ease of use are a big part of technology investment for companies trying to tap the mainstream.  Word of mouth/ Consumers Reviews are growing dramatically on the net and are extremely important motivating factor for many to use/do research on the net as often as possible.   
• Spreading the word has never been easier or harder – if you’ve got something that works or is worthy of sharing with someone else, there has never been so many great avenues to spread the word quickly.  Social communities, the blogosphere, sharing tools and web sites like Digg that make the speed to which you can get the word out fast. However if you’re value proposition isn’t there….it won’t stick very long and you might get a lot of negative stuff written about you. 
• Don’t forget that software always evolves – I’ve talked with a number of skeptics recently and debated whether there will ever be any competitors to incumbent business’ on the net.  My belief is that no business is ever safe because consumers always have problems and times are changing more rapidly than ever.  Only organizations that are slaves to the customer stand a chance to continue to be ahead of the curve.  The same is true of the incumbents that sit on the Web now as they need to evolve their software quickly to keep the hungry startups away.   

In summary:  I don’t think the internet has made a great enough step change to even warrant calling it 2.0, it’s probably around Web 1.3.  However, what we’ve seen over the last ten years is change in the capital markets, reductions in startup costs and an improvement of the tools/infrastructure of the Web ecosystem. My advice is to go out and understand everything about your customer challenges, take responsible advantage of the available capital, leverage the great new tools available (web services, blogosphere) and work with passion to create a great business that you believe in…. oh yeah, and of course pray for a little luck.         

Aggregate This!

So remember way back when in ancient Babylonian history when the only way we found anything was by going through either excite, AOL, lycos or yahoo.   The portal wars as we used to call them.  I can't remember but it was 6 or 7 big places where everybody was going to start for getting to everything else on the Web.  Business development deals ran rampant in the valley and the objective was to get some real estate on those portals because that's where all the eyeballs were.  Things evolved as focused destination sites of choice emerged.  The "long tail" started to fill out or at least the "fat belly" got a bit fatter.  Now we all have browser bookmarks of valuable sites that we like to start our information gathering from. I am not saying a lot of navigation doesn't still start at places like Google. Last time I checked it was north of 60% where overall navigation on the Web starts in a search engine.  However,  there are myriads of destination sites that people go to when they initiate one of their frequent Web sessions. 

What is happening now is that items(content,information) are being delivered with more effectiveness in general.  Services are emerging that aggregate and package information by aggregating the relevant objects from within Web pages.  So the net benefit to you is that you get what is most valuable presented back to you based on the way people think.  Where it gets even more powerful is around aggregating relevant objects of data from throughout the net and presenting it back to the individual in an entirely new way.  Some people like to refer to this as a version of leveraging the "collective wisdom of crowds".  Effectively, the net is the crowd in some way, shape or form.       

The technologies that are available now are becoming so powerful that I like to think of this as the next evolution of search.  While search 1.0 was about delivering more relevant Web pages in the information gathering process.  Search 2.0 is about grabbing and aggregating what is extremely relevant about all available content and doing some very special things with it in the presentation back to the consumer.      

I expect to see some big ideas emerge that aggregate data from the most diverse dataset that has ever been mined and deliver some really compelling ways to service consumers in short order.