The cloud has allowed modern, web-scale IT companies, like Airbnb and Netflix, to grow and flourish into booming enterprises all over the web. With its flexibility and efficiency, it supports the demand of an organization’s growth from zero to millions of users, allowing them to prepare for this potential growth, as well. Before the cloud, simulating millions of concurrent users and running scalability, stress, or stability tests was very hard to implement, if not impossible. Cloud technology has brought software testing, especially performance testing, to a whole new playing field.
By Jacob Morgan on December 16, 2014
Employee engagement and happiness is definitely one of the topics du jour for modern management and the future of work. Plenty of studies have already (and continue to) come out that show how low employee engagement is around the world (only 13% of employees are engaged and 87% are not!). Low employee engagement numbers correlate and oftentimes cause decreased productivity, waisted resources, and an overall toxic environment that nobody wants to be a part of…and why should they?
This is why it’s important to understand what employees around the world value in their jobs. So what do employees actually want and what do they care about?
A Tinypulse survey from 2013 revealed that transparency was the #1 factor for employee engagement
A 2014 SAP survey found that compensation is the #1 factor that matters most to employees
Another survey by the SHRM (Society for Human Resource Management) conducted in 2013 also found that compensation and pay was the #1 factor contributing to job satisfaction
Several other studies have also emerged around what employees care about at work but the most recent one from Boston Consulting Group which surveyed over 200,000 people around the world is one of the most comprehensive. Unlike previous studies which may point to flexibility or salary as the top factor for job happiness, BCG found that the #1 factor for employee happiness on the job is get appreciated for their work!
Based on the color coded categories you can see in the sidebar, out of the top factors the majority are grouped as either “work environment” or “job content and opportunities.” Perhaps what is more interesting is the contrary to some of the other studies which show compensation as the #1 factor for happiness, this report puts salary at #8. This reaffirms what I consistently see in organizations that I speak with. You can’t pay someone a lot of money, treat them poorly, and expect them to do their jobs well just because they get a nice check.
It’s important to remember that the “balance of power” is shifting away from organizations and towards employees. Today, we have a lot of choices to consider and several opportunities to evaluate when exploring how to make a living. Instead of going to work for a large established company that has more money, people can now:
- join a small growing startup
- become a freelancer on sites like odesk or elance
- drive for Uber or Lyft
- create their own products to sell on sites like Etsy
- raise money through crowd-funding on sites like Indiegogo or Kickstarter
- and much more
The war for talent has never been greater so in a world where cash is no longer the #1 factor attracting employees to organizations, these organizations must focus on other factors to create a more desirable and engaging place to work. What do you think of these recent number? Are you shocked or surprised to see that compensation is #8?
(Cross-posted @ The Future Workplace)
By Jason M. Lemkin on December 15, 2014
Just about a year ago, we did a post that proved, at the time, to be somewhat controversial. That in Just 30 Days, or at least, just one full sales cycle — you’ll know if your VP Sales isn’t going to work out.
This isn’t intuitive, and is something I had to learn the hard way. Many VCs and others will give you the contrary advice. So will many VPs of Sales. Give it Time. Sales is Hard. That new VP of Sales joined with “nothing”. Be patient.
Patience is important in SaaS, no doubt. Just not here, not in this one case.
My learning, and point, was that if you have a Great VP of Sales … there’s just one thing I know:
That if you are growing X% without a Great VP of Sales, that once you hire a truly Great VP of Sales … that you should be growing faster than X% within one sales cycle. One. 1. Uno.
How much faster can vary. Maybe a lot, maybe just a smidge.
It really doesn’t matter what resources are there at the time (no leads or lots of leads; no reps or too many reps; no marketing help or too much help). That will just impact how much better, how much faster things will go.
But … faster. Period.
One Sales Cycle.
I learned that myself. And my case study is here. Now, I’ve gone back with both my VP of Sales (Brendon Cassidy) and 2 of our sales directors, now each serving as VP of Sales at other SaaS companies. Did it happen again? Did they improve sales in less than one sales cycle?
Yes. Every. Single. Time.
Let’s dig in.
First up, how did Brendon, my VP of Sales, do the next time at bat? After finishing up a strong stint at Adobe after our acquisition, Brendon joined Talkdesk a few months ago as VP of WorldWide Sales. As the second U.S.-based employee, with essentially zero infrastructure under him.
Sounds tough, doesn’t it? Indeed.
And how well has he done? Even with zero infrastructure on Day 1 — he more than doubled sales in just 60 days. Again.
Net new sales (not total MRR, just new sales revenue from the sales team) below:
When he joined, Talkdesk at the time was doing about $1.4m in ARR. It will end the year at almost $4m ARR. Neck-bending acceleration. But how?
Same old story as last time. Same old story as when he joined EchoSign. And same story as when he joined LinkedIn before that.
Mega-impact. In one sales cycle. Irrespective of what was, or wasn’t, there when he showed up:
What happened? Did Brendon join as the world’s sales expert in call and contact center software? Of course not. In fact, it turns out be an even more complex sale than EchoSign.
Did he magically conjure leads out of thin air? No. Well a couple. But really there wasn’t enough time to do this.
What he did .. again … was:
1-/ Bring in a great team, almost immediately. 3 amazing reps that had worked with him before. A world-class solutions architect. Etc.
2-/ Qualify and Close. He immediately drove deal sizes up, and sales cycles down.
Combine 1+2 = dramatic increase in revenue per lead. Increase the revenue per lead, even with no other changes … and your revenue goes up. Period.
>> Ok great, you say. But that guy is some sort of magician. He did it before. Give me more case studies. Ok.
Next up, Sam Blond VP of Sales at Zenefits. Sam was our top Director of Sales at EchoSign, having rocketed through the ranks after coming in as our first SDR. Sam was Brendon’s right hand man. The padawan to the jedi. I introduced him to the CEO of Zenefits when they had one rep and < $1m in ARR. He joined in January ’14. Fast forward twelve months, they’re at ~$20m ARR.
Ok so obviously Zenefits has done awfully well this year, growing > 20x in 12 months. Wow. But how long did it take Sam to have a quantitative impact? 6 months?
Half a sales cycle.
Again, net new sales (not total MRR, just new sales revenue from the sales team) below:
Sam came in. He knew nothing about selling insurance. Nothing.
He brought in 3 great reps that had worked with him before. Introduced a more aggressive sales closing process, and halved the sales cycle.
Just those two factors alone doubled the Revenue Per Lead.
That’s how he made an impact in Half a Sales Cycle. No magic. Just 100% pure execution of The Playbook.
>> Ok, Brendon is a magician, and Zenefits is an outlier, you say. Show me more.
Next up, Stephen Green, VP North American Sales at Showpad. That’s him on the right. Stephen was another Director of Sales at EchoSign. In fact, Sam brought him in to EchoSign originally. Showpad enables field reps to dynamically present content on their tablets in the field. It’s very cool.
And they’ll will hit $5.5m ARR this year growing 150%+ YoY (from $500k to $5.5M in under 18 months).
But having known the founders since they first came to the U.S. around $500k in ARR, let me tell you, it hasn’t all been easy. It’s taken a while to get the lead gen engine going, go upmarket, etc. etc. It’s a space where awareness is building.
So OK. What happened when Stephen Green joined earlier this year?
Here’s a chart of net new revenue from the North American sales team (i.e., not all bookings, just new revenue from new accounts):
Same old story. Was he an expert in the Showpad “solution” when he joined? Nah. Were huge deals just waiting to close sitting in the pipe when he joined? Not exactly. Was there a new, amazing product release that changed the game? Nope.
He just did The Playbook. He’s a seasoned sales leader. He knows how to talk to customers. How to ask for the budget. How to get deals closed faster. How to cut sales cycles and ask for the e-signature. And he also brought in other reps almost immediately that upgraded the team.
So what happened? Again – Stephen reduced sales cycles from 15 weeks to 6 weeks. Again – he increased the quality of the closers. Together, these factors doubled the revenue per lead. In one sales cycle.
Ok you’re cherry picking, Lemkin.
But I could tell you more. Mohammad Ocean from our team did the same at Pipedrive within 60 days. He took inside sales revenue (vs. self-service) from $0 to $50k/month in less than 60 days. Boom! Greg Smith is doing the same at Parklet.co now too.
Ok, Ok you say — but what if your sales cycles are really, really long. And all outbound driven. Even with the World’s Greatest VP of Sales, I Won’t See Results That Fast.
Fair enough. You won’t. I didn’t really know the answer to this question myself until our Benchmarking the Best SaaS Start-ups Sessions at Dreamforce, embedded below (thanks to Salesloft), when both the CEO of Talkdesk and the CEO of Guidespark spoke.
Now Guidespark has been, until recently, a 100% outbound model. With relatively long sales cycles, given its six figure+ deals and focus on outbound sales.
It would probably take 6+ months to know here if the VP of Sales was going to make it (given the lengthy sales cycles + outbound approach). The new VP of Sales would have to quickly hire and scale an SDR team once he joined. And then work those raw leads into opportunities, which takes time. And then get them into a 6+ month sales cycle.
You simply aren’t going to know in 90 days in a 100% outbound model with a 6+ month sales cycle if the VP Sales is going to make it And Keith Kitani, the CEO didn’t — at least not quantitatively (though he knew quickly from the forward progress and opportunity creation that Shep was going to kill it). But by month 6 it was clear in the actual numbers that it was working, really changing, and the full quantitative results were there by month 9. One full, long, sales cycle.
By then, Shep Maher, the VP of Sales was just killing it:
A longer sales cycle = a longer time To Know. But again, results in one (albiet longer) sales cycle.
So net net: 7/7 times in these case studies … You’ll Know if the VP Sales isn’t Going to Work in Just One Sales Cycle.
You can’t predict after that how well a Great VP of Sales will do exactly. But you can predict was almost 100% certainly if she won’t work out if there isn’t some material improvement in one sales cycle.
So … again …
Don’t wait more than one sales cycle to make a change. 70% of VPs of Sales don’t work out. Maybe, even make a change in half a sales cycle. You’ll know even by then.
(And, p.s. — one more learning. If you do have a team like you see above, like I did — Never Sell. Keep going for it. Because it just gets better.)
sales guy image from here
(Cross-posted @ saastr)
By Randy Bias on December 15, 2014
Recently a major set of milestones was reached for the EMC Federation’s involvement with OpenStack. First, EMC and it’s affiliated companies and brands (VMware, VCE, Pivotal, RSA, Cloudscaling) determined a cohesive strategy for engagement with the OpenStack Foundation Board. Second, EMC appointed a VMware employee, Sean Roberts (@sarob), as the official representative of EMC and hence the EMC Federation generally. This means that I am no longer the EMC (Cloudscaling) OpenStack Foundation Gold Director.
The why of this may be confusing so I will briefly explain the background and then provide some more details on what exactly transpired.
By and large the OpenStack bylaws have stood the test of time quite well at this point. Most of the upcoming proposed changes are simply things we could only have known in hindsight. One area that I think the bylaws got right are the articles that limit participation by “Affiliated” companies:
2.5 Affiliation Limits. Gold Members and Platinum Members may not belong to an Affiliated Group. An Affiliated Group means that for Members that are business entities, one entity is “Controlled” by the other entity. “Controlled” or “Control” means one entity owns, directly or indirectly, more than 50% of the voting securities of the Controlled entity which vote for the election of the board of directors or other managing body of an entity, or which is under common control with the Controlled entity. An Affiliated Group does not apply to government agencies, academic institutions or individuals.
What this means, in essence, is that if there are two companies with a relationship like parent/child or joint venture, in which one owns more than 50% of the other, only ONE of the companies can join the OpenStack Foundation as a Gold or Platinum Member. This is a good measure to prevent a group of companies from “stacking the deck” within the OpenStack Foundation and using that as leverage to control or dominate OpenStack, which is something no one wants. I also need to note that any company may also have one to two Individual Members represent them. Two Directors from any single affiliated group is the maximum representation on the OpenStack Board of Directors. This works out to one Gold or Platinum Director plus one Individual Director OR two Individual Directors. This is why I am allowed to run as an Individual Director in 2015. Of course, I would very much appreciate your support in this endeavour!
So, things became very interesting upon EMC’s acquisition of Cloudscaling as it inherited the Gold Member status of Cloudscaling while VMware also retained their Gold Member status, creating an edge case where the Bylaws were technically in violation. This required EMC and VMware to work closely with the Foundation staff to resolve the situation.
This is why VMware resigned their Gold Member status and why EMC appointed a VMware employee as a representative for EMC and hence the EMC Federation.
Which means we should quickly explain what the EMC Federation is.
The EMC Federation is composed of a number of different entities, from security companies, to storage, to Platform-as-a-Service, big data, virtualization, converged infrastructure, and now OpenStack via the Cloudscaling acquisition. Members of the EMC Federation are already representatives on the OpenStack Foundation Board of Directors, OpenStack Foundation Gold Members, OpenStack Foundation Corporate Sponsors, and have deepening ties to OpenStack generally.
In April of 2013, EMC and VMware launched Pivotal and created a federation of its businesses. EMC is the majority owner, by a large margin of VMware, Pivotal, and RSA is a wholly owned subsidiary. Recently, VCE, the leader in converged infrastructure joined the Federation. Federation messaging and joint solutions were prominent during EMC World 2014. The following diagram gives you some idea of how the Federation is organized.
When asked about why the Federation model is needed and what differentiates the companies from competitors, the answer is “choice”. While VMware is the leading hypervisor, EMC also desires the opportunity to forge alliances and solutions with Microsoft, Citrix, and others. Conversely, VMware desires to support and work with a variety of storage and security solutions.
Similarly, members of the Federation desire to operate and support OpenStack’s mission in different manners (converged infrastructure, appliance models, and software distributions) while also supporting the joint goals of empowering and promoting OpenStack within the enterprise.
Wikibon covers the EMC Federation Model extensively here:
The EMC Federation OpenStack Strategy
As a group, the EMC Federation strongly desires to play by the rules of the OpenStack community, while deepening our commitments and contributions. As a group we are already a #6 contributor to the latest release and we aspire to go even further. OpenStack is a critical strategy for the Federation as a whole, even for members like Pivotal who see a significant increase in the number of enterprises who wish to run CloudFoundry on top of OpenStack.
What this meant for us when resolving the Bylaws issue is that we wanted to have the entire EMC group represented as a whole, such that others like VMware, VCE, and Pivotal, could all be a part of the picture. The Bylaws however require that the Gold Member selected is an actual legal entity.
Our final resolution was then to have VMware resign their Gold Membership, EMC retains the Cloudscaling Gold Membership, and in order to show EMC Federation coordination, EMC is appointing Sean Roberts to represent EMC, and hence the entire Federation, as our Gold Member representative. Finally, all of the branding on the OpenStack Foundation website will be a Federation-oriented branding (EMC2).
Meanwhile, behind the scenes, I’m working closely with Sean Roberts of VMware, Josh McKenty of Pivotal, Jay Cuthrell of VCE, and others to make sure that we have cohesion across the Federation.
Hopefully this helps explain these recent changes.
(Cross-posted @ Cloudscaling)
By Mark Suster on November 20, 2014
I’ve been having this PR discussion with three separate portfolio companies at once so I thought I’d just publish my thoughts more broadly.
I have written many times about PR so if you want a deep dive on the “how” of PR you may enjoy reading some of these posts.
PR is an insanely valuable activity in early-stage companies. Very few investors understand this and even fewer startups. When you’re an early-stage business every dollar matters and because many startup teams these days are very product & technology centric they often miscalculate the importance of PR. I believe PR is often not tangibly measurable and for quant-oriented people this is hard to accept.
The benefits of PR are exactly that: Immeasurable. They are silent. They don’t show up in a calculation that says I spent $7,000 and I got X-thousands inches of press. It doesn’t work that way.
1. Recruiting – One of the hardest tasks of any startups is recruiting world-class talent. It is possible, of course, to recruit great people as an underground startup but it is 10x easier when qualified candidates whom you may not even know read about your company and are excited by your vision. I work with a startup who has an insanely talented & connected team but still struggled to add staff. After their recent PR they reported back to my that candidate inflow has gone up dramatically. As I said, PR has silent benefits that you barely recognize until your newly acquired team is firing on all cylinders and many people sort of forget the reason they attracted such great staff was from great press coverage / world-of-mouth.
2. Business Development - Biz Dev is hard. You’re a startup and every major company you meet is trying to size you up as to whether it’s worth their time striking a deal with you. Then they read about you in the American Airlines magazine or Wired or Recode and they think to themselves, “we should really reach out to that company.” You get the call. You’re happy. Business is going well. There is no attribution on that inbound phone call. By the time they’ve called they may not even remember themselves where they first heard of you. PR pays dividends in Biz Dev.
3. Fund Raising – No self respecting VC would admit (even to themselves) that they are influenced by what they read about you in the press. But human psychology can’t be ignore – we are all influenced by what we read. Sometimes you read it directly and think, “I should really reach out to that company” and sometimes it comes in the form of world-of-mouth like somebody I work with mentioning a company they read about. But as I like to tell entrepreneurs, great PR could add $10 million to your valuation or increase your chances of closing a round 2x and either case is a reason to make sure you have good press. It’s much hard to get funded as a company nobody has heard of.
4. Staff Morale – Often overlooked is staff morale. I once asked somebody at Accenture (where I worked early in my career) why they advertised so much at airports. The reply was, “So many of our employees fly every week to projects and by seeing us advertised every time they fly they feel more proud working for our organization.” Well, at least until Tiger Woods decided to send a few too many racy text messages But the reality is that employees love seeing their company get positive press. They get feedback from their peer group, boyfriend and parents. Classmates call. People give them attaboys. Press matters. You can’t measure the retention benefits but I promise it exists. Just like negative press hurts.
5. Enterprise Sales – The very first thing a potential customer does when you email or call to set up a meeting is Google you. When they want to propose spending money with you their boss Google’s you. So does the enemy who is fighting for the customer to choose another vendor. Give your champions ammunition.
6. Future PR – This is something often overlooked. When you eventually want your home run coverage in the Wall Street Journal or are trying to convince Good Morning America to have you on their show – the first thing the journalist or executive producer will do is Google you. If they find great pieces on you from your past PR they are more likely to want to talk. Of course you need a new angle to get a journalist interested because they don’t simply want to write what everybody else has covered. But neither do they want to be out on a limb as the first person predicting you will change the world. Press loves company as much as they love exclusivity. Ironic, of course. But true. I promise.
7. Customer Acquisition - I left customer acquisition for last intentionally. Why? Because every single company I talked to thinks this is the reason to do PR and often it is the least important reason. The narrative goes like this, “We appeared on TechCrunch” or “We were featured in the App Store” but we didn’t get nearly the downloads we expected. Many people downloaded our app / visited our website / etc. but didn’t convert to sales. So this was a wasted effort. We’re going to dial down our PR for a while.”
See points 1-6. Rinse. Repeat.
When I was the CEO of my first startup our company won the B2B PR company of the year in the UK. Not for startups – for any business. In the write up of our success I was quoted as saying, “If I had $1 dollar left to spend on marketing I would put it to PR.”
If anybody tells you differently be suspect. Most people don’t understand the silent benefits.
What have your experiences been? What stories can you tell about the silent benefits to your company?
(Cross-posted @ Both Sides of the Table)
By Mark Suster on November 19, 2014
I was at a dinner recently in Chicago and the table discussion was about building great companies outside of Silicon Valley. Of course this can be done and of course I am a big proponent of the rise of startup centers across the country as the Internet has moved from the “infrastructure phase” to the “application phase” dominated by the three C’s: content, communications and commerce. But the dinner discussion included too much denial for my liking.
I think startup communities being simple cheerleaders doesn’t help anyone. Those of us outside Silicon Valley need to make an effort to effect change not just wish for it.
At the dinner some of those arguing that Chicago has everything it needs now that it has built: GroupOn, Braintree, GrubHub and others and that it has “come along way” and “will never get the full respect it deserves just because it’s not Silicon Valley.” But I think this misses the point. I’m a very big fan of Chicago. I started my career at Andersen Consulting (now Accenture) so I went to Chicago many times a year for nearly 9 years. I then got my MBA at University of Chicago so I secretly pull for local entrepreneurs as long as they don’t make me visit in the Winter any more.
But no community can become complacent with the wins that it has. It’s not the great companies you build, it’s the silent killer of those that should have been build locally and weren’t. It’s the thousands of jobs that weren’t created but you don’t even know it.
Think about Facebook had it stayed in Boston. Could it have become the behemoth that it is today? Who knows. But I’ll bet the Boston community would take 50% of the success of Facebook built locally. And the truth is that successful startups beget more successful local startups, wealthy VPs who go on to build their next startups, etc. Even Mark has acknowledged moving wasn’t the be all, end all in this famous interview
“If I were starting now, I would have stayed in Boston. [Silicon Valley] is a little short-term focused and that bothers me.”
Boston is still a great tech hub. But wouldn’t it want to be great PLUS have Facebook?
We have similar stories in LA and most people don’t know it. For example, Lookout is a mobile security company that was founded by three talented graduates of USC. They started their company in LA but a couple of years after raising capital from Khosla Ventures in the Bay Area they ended up relocating there. A few years later they announced $150 million in a funding round at $1 billion+ valuation and are ramping up jobs to secure their market-leading position. You could say the team would have gone North anyways. Perhaps – who knows? But I know with local funding and local support that’s certainly less likely.
And consider Snapchat – one of our hometown favorites as they’re based in LA (Venice Beach). Luckily for our community the founders decided they wanted to build their company in LA regardless of not having local funding from LA. That’s our great gain as Snapchat has also raised a lot of money at a monster valuation ($10 billion reported) and has been scooping up talented Stanford engineers and relocating them to LA. Locally we call it “the Snapchat effect.” The VPs of SnapChat will be LA’s great founders 5 years from now.
Silicon Valley is littered with startups where the founders were originally in LA. Klout was an LA company – sold for $200 million to Lithium. As was FarmVille (sold to Zynga) and many, many others.
Local capital matters. Local mentors matter.
That was my original idea behind Launchpad LA. I figured if we couldn’t fund every company locally we should at least embrace them as a community and show that we’re willing to mentor them whether they raise their money in town or not.
So what can a community do?
I often point out the story of when we raised our fourth fund a few years ago. I went to see several LP funds in Boston. At least twice I had conversations that went like this, “Yes. It’s true. Your fund performance has been great. But there’s also several great funds in Boston and while our first priority is to returns we have an equal responsibility to local funds and local jobs.”
LA public pension funds and endowments have historically been the opposite. I think government and community members need to understand that capital formation is an incredibly important part of economic revival. People often say, “Great entrepreneurs will build a community and the capital will follow.” I don’t see much evidence of that. I think it’s a combination of the two. It’s clear capital with no talent ends up having to travel to do deals. But talent with no capital is another word for migration.
And then there is public policy. Historically the City of LA has been hostile to startups. I’m reminded of LegalZoom who was founded in LA but moved it’s headquarters to Glendale and much of its operations to Austin, Texas. While LA was trying to impose archaic taxes on the firm and seemed to care less about its existence since it was a “startup” – the first lady of Texas welcomed them to Austin by picking up the CEO at the airport on his first visit there. It’s no wonder hundreds of jobs migrated. Luckily since then we elected Mayor Eric Garcetti who understands the importance of startups and of technology and venture capital on job creation.
But we still need more funds. No – I’m not worried about the competition. We’ll win our fair share of deals. But when you remember the Snapchat effect you see that I gain even from the deals we didn’t get to do. I’m guessing the future leaders of Lookout will build companies in the Bay Area.
Communities can make a difference. I wrote about the awesome efforts of Cincinnati to stimulate its startup community and the role of Paddy Cosgrave in Dublin, Ireland as well the entire Irish business community, the IDA, etc. who woo businesses to put their headquarters there. I also covered the impact of Brad Feld in Boulder or Fred Wilson in NYC as observed from my keynote on a trip to Seattle, which I felt could have a huge boom if its elder statements embraced startups a bit more.
Don’t get me wrong. Chicago has made strides. The Pritzker Family has been very active and the opening of 1871 as an entrepreneurial hub is a great example. But my conversations with countless Chicago entrepreneurs suggests it has similar issues to all non-Silicon Valley centers: not enough venture capital, too few tech angel investors, not enough talent for product management or engineering, not enough local tech powerhouses to drive local biz dev / keiretsu. I think this is true of LA, NY and many other tech communities so I’m not singling out Chicago.
My point is this … cheerleading isn’t enough. We need to help create local venture capital funds who may be national in investment strategy (as we are) but who will do more than their fair share of fundings locally (for us that’s 50%). Fund formation + local mentors + local talent = a shot at creating successes that drive the future job growth of our great cities.
(Cross-posted @ Both Sides of the Table)
Posted in Entrepreneurship, Featured Posts | Tagged Entrepreneurship, facebook, google, Job Growth, los angeles, San Francisco Bay Area, silicon valley, startup lessons, startups, vc funding, venture capital
By Michael Krigsman on November 14, 2014
The role of IT and CIO continue to evolve as broad economic and cultural changes shift business expectations of technology in the enterprise. As a result, this is a tumultuous time for IT and many of the old rules defining CIO engagement no longer apply.
Technology disassociated from direct business consequence, decision-making, and action is not a viable strategy for today’s CIO. Modern IT must help departments across the organization make better and faster decisions. Although infrastructure and security remain fundamentally important considerations, business improvement is the core mission of IT.
A new study from the Society for Information Management (SIM) documents the changing role of IT and the CIO. The report is among the most detailed and transparent I have seen, representing a huge cut above the shallow, self-serving documents so often peddled in the name of research.
To complete this study, called the 2015 SIM IT Trends Comprehensive report, SIM received 1,002 responses, including answers from 839 senior IT leaders representing 717 unique organizations. Of these, 451 identified themselves as CIO, by title or role. The report includes an appendix describing the research methodology in detail.
The press announcement includes this brief summary:
- IT spending is on the rise, with companies on average spending more than 5 percent of revenues on IT (up from about 3 percent from just a few years ago). To illustrate, that means that IT budgets of the largest companies in the Fortune 500 can be as large as 75 percent of all of the companies on the list.
- Largely as a result of that investment, IT is becoming more strategic and more complex. While at the same time CEOs are complaining that CIOs “just don’t get it.” IT is keeping the lights on, but CEOs aren’t getting the strategic foresight and innovation they are looking for from IT leaders.
- Companies are investing in big data in big ways to make better business decisions.
- Cyber security threats are driving more IT spending to help combat those threats.
Top IT management concerns
Respondents choose up to three issues from a list of 40, to determine the most important points of concern. This table lists the top ten:
The report explains that historical data supports the assertion that IT priorities are becoming increasingly focused on business issues:
there has been a shift in priorities and focus among organizations and their IT leadership away from tactical and operational IT issues like efficiency, service delivery, and cost reduction to more strategic and organizational priorities like business agility, innovation, the velocity of change in the organization, IT time to market, and the value of IT to the business. It seems that IT is becoming more strategic and business-focused and presumably the organization is becoming more digitized.
Largest IT Investments and Most Important Technologies
In general, there is good correspondence between level of investment and technologies that IT believes are most important to the organization. The following table compares respondents’ most important investments to their largest investments:
The report comments on differences in the two columns:
As for the differences in the rankings between the two lists, Data Center Infrastructure, a capital intensive item for an organization, ranks only sixth on the most important technology list (with 13.1% selecting it), but second on the largest IT investment list (selected by 19.1%). Legacy Applications, selected by 5.6% of organizations and ranking as the 15th largest investment, was selected by 7.9% to rank 10th as a most important technology. Big Data is 10th on the top 10 list of largest investments (selected by 8.8% of organizations), but only ranks 12th on the most important list (selected by 7% of responding organizations’ senior-most IT leaders).
IT spend as a percent of revenue
Percentage of revenue is a useful tool for organizations to benchmark their level of IT investment against similar companies. The respondents in this survey include a broad range of industries and company sizes. For this question, 493 unique organizations responded with their investment as a percentage of revenue. As showing in the graph, these companies averaged 5.145 percent in 2014:
The report comments on the investment level reported by the survey:
average IT spending as a percentage of revenue for the past three years has been significantly above the 10-year (2005-2014) average of 4.08%. This may represent a “new normal”; however, it may also to some extent be indicative of “catch up” IT investments making up for the lean “Great Recession” years of 2008 to 2010, when both revenue and IT investment contracted in most organizations (see Figure 13, Figure 15, and Figure 16). This increase is also being affected by new investments in cloud and shared services, digital marketing and analytics, and health care informatics, as well as the increasing digitization of organizations in general.
IT alignment and credibility
The changing role of IT raises profound strategic questions for the CIO and his or her relationships with other parts of the organization. Questions around level of investment in IT, CIO priorities, and customer satisfaction with IT revolve around the relationship between IT and other departments. SIM recognizes this and therefore added several questions on IT strategy and innovation to the current year’s research:
The SIM research is solid, and CIOs should feel confident using the results to benchmark their performance against other companies.
The report includes data on a variety of topics, but perhaps the most important relate to IT’s capacity to formulate business strategy and participate in high-level decision-making. The following table lists CIOs’ top performance metrics:
These metrics show that CIOs understand the importance of demonstrating value to the business. However, a body of other research indicates that many business leaders do not think IT provides sufficient value. I will write about this in more depth later, but in one study from Deloitte, for example, only 49% of CIOs said their own IT organization is a strong partner to the business. It is a striking admission for CIOs to acknowledge lack of effectiveness in this key area.
I asked the lead researcher, Professor Leon Kappelman of the University of North Texas, for his advice to CIOs. Kappelman offers four keys to being a “CIO survivor,” as he calls it:
- Learn the business; be the business; become the business
- Develop a flexible, agile infrastructure to ensure that IT can keep pace with business changes
- Build a strong team with a strong bench
- Create value-creating partnerships with other senior executives and business leaders; Do the same with customers and suppliers of the business, and with your IT vendors
The message to CIOs is clear: there is categorically no substitute for developing strategy-level relationships with senior business decision-makers and other constituencies. These relationships form the backbone for advancing IT and providing higher value to business partners.
(Cross-posted @ ZDNet | Beyond IT Failure Blog)
By Jason M. Lemkin on November 14, 2014
The fourth and final part of the 1.0 version of the “Predictable Revenue Guide to Tripling Your Sales”, the SaaStr + Aaron Ross + SaaStr sequel to the original Predictable Revenue, is out now.
You can download it here.
The next step is a final revision of what we have on the way to print publication sometime in 1H’15.
Any comments or thoughts, please post below or send in. We’ll take as much of the feedback we can and put it into the final draft and print.
(Cross-posted @ saastr)
By Joel York on November 14, 2014
As many of you may know, Trish Bertuzzi and the folks over at the Bridge Group publish a lot of great stuff on Inside Sales strategy and operations, including inside sales compensation benchmarks, lead development rep best practices, outbound selling strategies, and on an on.
Their upcoming 2015 Inside Sales Metrics and Compensation report will feature expanded coverage and focus of SaaS inside sales benchmarks in an extra effort to service the SaaS community. But the numbers are only as good as the data, so I’m reaching out to all my SaaS sales colleagues to TAKE THE SURVEY!! It only takes 6 to 8 minutes to complete. As motivation, SURVEY PARTICIPANTS WILL RECEIVE A PRE-RELEASED COPY. If you don’t do it, your competitors will .
For reference as to how great the fruits of your labor will be, here is a link to the 2012 Inside Sales Compensation and Metrics report. And, if you haven’t come across the other inside sales resources the Bridge Group has published, I highly recommend you check in out.
(Cross-posted @ Chaotic Flow by Joel York)
By Sadagopan on November 11, 2014
The sweeping opportunities arising out of digital centered structural changes in enterprises are really enriching and can create deep business impact in the short and, medium and long-term. The participants in the digital world enjoy high degree of empowerment with a mouse click or with access from any digital front-end device. In the multichannel world, with different ways of participants coming together, a wide range of combination of association get formed across the offline and the online world. Many of the associations will be experimental in nature to start with and over-time the collaboration aspects will become more and more important and will help create value for the enterprise/ecosystem. Seen at a different level, it can be seen that digitalization is substantially changing the ethos of interaction in our social and business lives.
On an ongoing basis, one can see that digital disruption is shifting the sands of the profit landscape as well. Studies show that enterprises that have embraced digitalization report better returns and industries affected by digitalization, by being unprepared have had to sacrifice sales and margins. Clearly, value is migrating and enterprise leaders aren’t always sure if they’re experiencing short-term cyclical change or long-term structural change. There is consensus across the board in may enterprises that legacy assets are losing value and there is a widespread need to invest to capitalize on new, digital-related opportunities. More subtly, companies are developing new digital value in their supply chains and processes. Due to the wide reach and deep impact digital can enjoy, many enterprises are forced to rethink the very nature of their core business.
It’s now well known that traditional barriers of entry don’t hold water with players muscling in with digital at their core of business. Boundaries get distorted, categorization and niche gets torn apart, enabling a new wave of entrepreneurs and getting innovation aficionados into the mix. Digital technologies and their extensions can power a phenomenal range of technologies centered innovations – these could be far reaching in their impacts and can have a powerful cascading effect across the ecosystem. The traditional players face enormous pressure to defend and grow their turf and this collective continuum of changes and their impact – bot for winning, defending and sometimes losing can be termed as “Digital Disruption” . The intensity and the range of time to experience this disruption may change across sectors and geographies. As with any major change, in some sectors, the impact may be large and may be felt at once or over time and in some sectors,the impact may be felt only over time. Some sectors/ lines of business may actually get created because of the digital forces in action.
Enterprises – big and small impacted by the digital wave of disruption have really no choice but to find effective ways to respond to defend or take advantage to grow. With the digital onslaught being so powerful – think CAT5 storm is passing through your region – the impact will be deeply felt. The enterprise response can happen at various levels and typical response would be centered around:
- Reimagining corporate strategies and business models
- Customer centricity
- Revenue stream reassessment
- Cost structure revisions
The winners here take the long view and approach any change top down – with deep commitment and care. The wide ranging impact should factor in the changes needed internally and a clear appreciation of the way traditional business landscape is getting changed – the very nature of demand generation, consumption, competition, communication, customer expectations – all have profoundly changed. The balance of power in the commerce equation between the producer and the consumer is now firmly loaded in favor of the consumer . The wide adoption of connectivity and the resultant wave of information and the ability for the consumers of the information to take part and share their views to the potential next set of customers in real time gave made the consumers the unanointed kings and queens in the equation.
First the issues around strategy – its important to realize that one size fit all wont work for all, this wont work for players even within the same industry – as value chains undergo huge change. The opportunities and threats could significantly change for different business inside enterprises. In recognition of this, the approach to embrace the digital wave has got to be so specific that business need to define the right strategy not just at the enterprise level, but preferably at the business unit level. The core model of operation needs to be reassessed for enterprises trying to embrace digital – in this universe, the power of information and data are so formidable, that many times business integration revolves around different ways of rejigging the information flow and set stage for opportunities to create more value across the chain.
The question at a high level that needs answer for every business is how to positively embrace digital disruption. While, this is a very detailed exercise calling for a rigorous evaluation of possibilities to be engaged in a highly disciplined way – assessing possibilities, opportunities for changing the game and for further upsides in traditional business outcomes, it can be safely said that the key tenet of digital disruption is about the range and amplitude of change that business could experience soon. This also involves assessing the myriad possibilities that can be reaped when powerful digital opportunities get pursued across various business streams. Digital at its heart can allow business by helping them through innovative means to target new customer segments, power new business models and in some cases help create entirely new lines of service for the enterprise. Digital technologies can help enterprises to explore adjacent markets more easily – either on their own or as part of a larger ecosystem. Repeat this for exploring adjacencies in customer segments, geographies, product segments etc. Scaling up and scaling wide can become distinct possibilities for business, when they embrace and get digital.
Already digital promotional/ad spend is becoming a dominant category in an enterprise customer/prospect reach out efforts. These mechanisms help enterprises target newer segments leveraging the ecosystem – search engines and low cost online advertising etc. The data that gets collected will embolden business to more specifically target their customer-base, opening possibilities of cross sell, upsell and rich returns. For example, location information discerned through maps or email usage or spreading content through multiple channels, value added data procured from mobile service providers – all these help in better targeting the enterprise customers. The customer segmentation models gain more maturity by learning from enterprises more focussed on enhanced targeting mechanisms.
Some strategies that help enterprises reach new customers include adequate leverage of the 4P’s of marketing and beyond. For example, social is becoming a significant frontier in targeting – in allowing business to interact directly with customers and prospects and being able to reach out to them at very low cost to the enterprise. With adequate leverage of social enterprises gain much better targeting insights, leading to more better granular segmentation.The highest level of maturity in an enterprise digital journey is the ability of the enterprise to leverage the pervasive digital connections that exist in their ecosystem connecting systems, people, location and things. All the technologies – ranging from smartphones to remote sensors, need to be appropriately leveraged for pursuing strategy refresh, customer centricity, creating new business models. realigning the cost structure and setting up new new streams of revenue. Such measures would collectively propel the enterprise to acquire a digital edge, which it needs to continually review and hone for success.
By Mark Suster on November 11, 2014
As I’ve written about recently, at Upfront Ventures we started talking a couple of years ago about wanting to fund stuff with more meaning. I think this is a combination of being realists as venture capitalists that outsized returns in our funds must come from taking on bigger, more impactful projects that can move markets. It is also a function of the stage of much of our careers where we aren’t interested in playing small ball with incrementalism on how to squeeze out an extra 5% of margin by optimizing the Internet slightly better.
The reality is that as VCs we have limited allocations of where we can spend our time so we want to attach ourselves to projects in which we, too, can be passionate. It’s true the some VCs have started writing so many checks that they resemble stock pickers but the majority of us still have less than 10 board seats at any time and tend to go pretty deep so the result is that we care deeply about where we commit our time.
Meredith came to see me along with the CTO Marc Berte. They had been introduced by my friend Brian Garrett, a partner at Crosscut Ventures and the ambition outlined in their deck seemed almost unbelievable, “to make wireless charging of phones (and other devices) as easy as WiFi” that I had to see it for myself. They demoed the electricity transfer with a physical device that looked like something that would never be allowed on an airplane. But it seemed to work.
I spent one hour with them. I had back-to-backs all week and that’s what it’s like when you squeeze in a last-minute meeting. But I walked out and asked our entire team to go in after I left. I said simply, “That’s the most ambitious project I’ve seen since I became a VC.”
The approach was clever and novel. Take electricity as an input and through a process called ultrasonic transduction to convert it to a soundwave that can be beamed from a transmitter to a sleeve on your mobile phone that would use and ultrasound receiver to convert it back to electricity and charge your phone. Many of their innovations that allowed this to work when nobody else had solved wireless transfer at a distance (several meters) included:
- A transmitter compact enough to be practical to hang in restaurants, coffee shops, your car, your home, etc.
- A receiver thin enough to be a sleeve on a phone and small enough in surface area requiring the right materials (they can transmit & receive with devices thinner than 5 millimeters),
- Precision tracking software so they can focus the sound beam to concentrate the sound wave exactly to your receiver and avoid inefficiencies of diffusion
- Methods for identifying the size, shape & motion of devices while they are moving
The goal is straightforward. uBeam intends to charge your mobile phones at amazing speeds while you are simply using your phone or setting it down anywhere. Over time, working with manufacturers, uBeam has a method that will allow the battery life to last 10x longer than today’s batteries before they degrade. They can allow manufacturers to use thinner batteries and thus further miniaturize phones.
And the truth is that Team uBeam doesn’t want to stop at phones. With the explosion of “wearables’ wouldn’t it be nice if you didn’t have to charge your watch, fitness tracker or noise-canceling headphones? What about if elderly people never had to ask a relative or healthcare worker to change the batteries on their hearing aids? The practical uses for uBeam technology is limitless.
This kicked off a frantic process of discovery for me personally
- Did the physics actually work? Check
- Was it safe? Well … for starters it is just an inaudible soundwave being transferred – as in the kind also used for women during pregnancy. It also happens to be how your car likely tells the distance to objects when you park or if you have a side assist whether you can change lanes safely. Check
- Was there consumer demand? No brainer. If electricity could be transferred like WiFi but as safe as a soundwave we use on pregnant women’s bellies and at a price-point that was attractive this is a multi-billion market. Check.
- Could we produce this at cost? At scale? Here is where having Marc Berte and a team out of MIT who have designed systems like this for years gave one confidence we could do something others couldn’t copy and at price points that could make us market leaders over night.
- Did anybody hold patents that would prevent us from using this technology? I seldom hire patent attorneys during due diligence but this was too important. We hired OSHA regulatory lawyers. We hired IP specialists to review prior art. We grilled their IP attorneys. The more we dug the more confident we became (and so did every advisor we used).
And then the most important factor for me – who were these people? Were they ambitious? Did they have the right skills? Would they build a world class team.
Meredith Perry came up with the idea for uBeam while still in college at University of Pennsylvania and like many great inventors won her school’s business plan competition. It turns out that while she had the right idea the materials needed some reworking to come in at the cost structure required to build a business at scale. Marc Berte started helping her to perfect the materials and approach and the two together had a huge break-through that led Marc to decide to join Meredith in her journey. He became so passionate about the idea that he decided to go full time and began recruiting some of MIT friends to the project.
With Meredith I did every on-reference-sheet call I could make and many off-reference-list calls. I followed my playbook on reference calls making sure to ask both positively worded as well as skeptical questions. “Ambitious,” “Driven,” “Crazy Smart” and “Secretive” were the adjectives most used.
She had raised seed funds from a who’s who list of investors including Andreessen Horowitz, Founders Fund, Marissa Mayer, Marc Cuban, Troy Carter and so on. Many people had small, very early bets on the company but the question was whether I was going to take the first big bet. One of her seed investors is Jonathan Triest of Ludlow Ventures who I really enjoy speaking to and trust his input. He was doubling down on his investment and also gave me a great lay of the land on handicapping how all of the other seed investors saw the company.
I also got the insights of her biggest champion from within Andreessen Horowitz, Margit Wennmachers, who talked me through when she first met Meredith, how she’s grown, the maturity of Meredith to interact with Silicon Valley’s good & great and be nonplussed about it. She connected me with Andreessen’s due diligence team who were surprisingly open with all the technical analysis they had done. It was impressive. And then I spoke with Marc directly who also gave me refreshing views on the company and his word that he would personally stay involved from A16Z and a desire to invest more than their prorata in any round.
But the most important character building itself was just seeing the talent of the people who were lining up to work with Meredith. Accomplished executives well her senior were very comfortable joining Meredith on this journey and trusting her leadership to raise capital, do business development deals, build a team and ultimately a great company.
And finally it comes down to the good old instinct test. Through many meetings discussing strategy, approach, recruiting, financing, etc. I became impressed with Meredith’s maturity, willingness to learn and lack of fear in taking on the enormous challenge of leading a company as ambitious as uBeam. I am inspired by her ambitions and plans.
I can’t wait to see what Team uBeam produces.
Note: Company headquarters is in Los Angeles with major R&D also happening in Northern Virginia.
- uBeam Just Raised $10 Million So You Can Charge Your Phone While Walking Around Your House
- uBeam Nabs $10 Million In Funding From Upfront Ventures To Make Wireless Charging A Reality
(Cross-posted @ Both Sides of the Table)
By David Meyer on November 10, 2014
The 1200 baud modem was sweet in its day, but now we have broadband. The fax machine and beeper transformed businesses, but now we have smart phones, messaging apps, and near field technology. And while Active Directory is still used by 95 percent of the Fortune 500 today, with the rise of the cloud, it will soon be time to move Active Directory from the core to a legacy support system, to the trash bin.
According to a compilation by BetterCloud, Piper Jaffray predicts that in five years, one third of workloads will run in public clouds. Gartner has found that Google’s productivity suite is taking market share from Microsoft, predicting that by 2022, of 1.2 billion office suite business users, 695 million will rely on the cloud. My own conversations with today’s hottest start-ups all sound the same – these businesses are not managing files, email, and applications behind firewalls. It’s cheaper and faster to use apps like Egnyte, Dropbox, Huddle, BambooHR, and Marketo. In this new world, Active Directory functions poorly as an identity management solution.
For example, a recent client, a company with 15,000 employees in more than 2,000 locations, tried to roll out Office 365, but the administrators were completely overwhelmed by the complexity of using Active Directory Federated Services (ADFS) and had to seek an alternative solution designed with cloud identity management in mind. The complexity of extending Active Directory to the cloud slows IT deployments to a crawl. Born at a time (the 1990s!) when IT dictated every aspect of technology, this identity management solution hasn’t kept pace with the new technologies organizations need to implement. For example, implementing single sign-on (SSO), a foundational component to identity management, typically requires a custom integration project that can take months to finish, even without including essential features such as multi-factor authentication and rapid de-provisioning. And every time you add a new application into the mix, you have another integration project.
The move to the cloud should accelerate time to value and offload complexity, but mixing the cloud with Active Directory and ADFS is doubling your investment in the past, while waiting longer for the future.
Active Directory makes life more difficult for IT. The growing number and diversity of enterprise user communities and cloud applications puts pressure on IT to untangle a mountain of different security policies and authentication procedures. Managing all this in Active Directory, especially in today’s decentralized organizations, is incredibly time-consuming, leading to higher identity management costs and an overextended, discouraged IT department. Just getting a short-term contractor access to the right apps with the right entitlements can take hours or days, wasting precious time and money.
The move to the cloud should enable organizations to do more with less, but with Active Directory in the mix, it’s only IT that does more while business users do less.
Finally, relying on Active Directory in the age of easy-to-deploy cloud apps increases security risks by encouraging the rise of “shadow IT.” Users know how easy it is to sign up for cloud apps and begin using them, and facing their own pressure to perform, they have no patience with an IT department hampered by out-of-date tools, so they simply bypass IT. In fact, in our 2013 State of Cloud Application Access Survey, 71 percent of respondents admitted to using unsanctioned apps like Dropbox and Google Apps to get work done, while 44 percent said employees still manage passwords on sticky notes and spreadsheets.
The move to the cloud should never compromise network or data security. In fact, it can improve it dramatically, since cloud vendors endure security audits that would make many IT organizations crumble. But resting these efforts atop Active Directory has many hidden costs, with only an illusion of security.
Active Directory gained popularity for a good reason, but it should now take an honored place in the Hall of Fame. While enterprises with a large Active Directory install base will require time to wean themselves from the solution, those companies that resist changing their identity management strategy because of inertia, product loyalty, or in-house expertise will find themselves less productive, less secure, less agile, and ultimately less competitive.
(David Meyer is VP of Product at OneLogin, a Real-Time Identity Management & Single Sign-On provider.)
By Adron Hall on November 9, 2014
I know I know, the marketers say it’s all about the single articles now. Nobody reads blogs. Nobody subscribes to blogs. Ya know, except of course for that small percentage of people that do.
…marketing, it’ll make you insane if you’re not careful.
But seriously, here’s a few blogs that are actually worth reading. They’re worth subscribing to and surprisingly, they’re blogs that businesses organize and write. Yes, I have and might be writing for some of them in the future. But I’m honestly basing this list on a few specific criteria:
- The blog has to include some technical content that is important to getting kick started with their product and getting kick started with other tooling around their space.
- The blog has to include articles that have industry information that is relevant to conferences, meetups, and other community related activities.
Here’s my list of reads lately:
Codeship Blog – This company provides continuous integration and deployment services. Everything is super easy to get started with. The team is active in the tech communities. They regularly blog about getting Java, Node.js, Rails, Ruby or other stacks up and running, deploying cleanly and deployed to their final destinations.
Orchestrate Blog – The crew at Orchestrate (which I have written for a while back) have a steady stream of awesome flowing from their brains. The blog is chock full of ideas, implementations of various apps, and they are involved via the blog and in person with community events, conferences and the like. It’s a solid blog to be subscribed to.
AWS Blog – I’ve never written for the AWS blog, but I follow it as it is a steady stream of updates about the product and services but also includes other information regularly. They don’t always branch out beyond their space, but they’re so huge and cover so much space, the topics end up being pretty diverse anyway.
New Relic Blog – I write for New Relic on a regular basis. They’ve got a great selection of posts that go up from meetup recaps and notifications, to conference recaps, commentary and follow along of events and of course the technical content for everything from .NET to Java to Nodejs to Ruby on Rails. You name it, they likely have tips, tidbits and tricks every now and then.
There are a few others that I might tack onto this list in the future. But for now, that’s my top 4.
(Cross-posted @ Composite Code)
By Mark Suster on November 9, 2014
We all know that funding markets have changed for startups. The trends are well understood: more angels, more seed funds, more crowdsourcing and so forth. We all can intuit the benefits to founders of these trends so there’s little reason to elaborate. What is less understood are the consequences of these changes.
I have blogged about some of the downside consequences of the changes and the private information I have says the consequences are much worse than is reported in the press since few people publicly talk about
There’s another issue I can add to your list of things to be aware of – information rights. Generally speaking in venture capital financings the legal documents will specify that only “major investors” (a threshold set in the agreement – which can be $500,000 investor or more). There is a reason for this. In a funding round with 1 or 2 VCs and 15-20 angels or 4-6 seed funds if you gave every investor you financial information and performance metrics your proprietary information would increase in its probability of leaking out.
But shouldn’t an investor who has given you $50,000 of his or her hard earned money be entitled to know how you’re doing? Yes. And no.
I am generally a fan for providing management updates periodically for all investors but in doing so you must assume that what you send out will get read by others and thus hold back on your most sensitive information. I’m not saying that VC behavior is always impeccably honorable but the truth is that there are so few VCs and the reputational costs of bad behavior are now so high that becoming known as somebody who leaks confidential information can have immediate negative consequences. So I recommend a high-level “state of the company” email a couple of times a year but a message that you assume might get shown to others. I’d keep your financial performance to your board members who are anyways directed by law to represent the interests of all shareholders. This is no different than a public company where of course most investors are not given detailed financial and performance information and when they are it is quarterly and after the fact.
There are now so many new early stage investors and many of these are new it’s not so obvious whom you can trust.
Let me give you a real world example from this week.
We led an investment round in a company a while ago in which we wrote a seven-figure check and have taken a board seat. We are doing what we do – writing larger checks and playing an active role at the company. Another investor – not one we’ve worked with before and not likely one we’ll work with again – wrote a $25,000. Simple enough – we like allowing small investors into rounds because they often bring additional relationships to a company that can be helpful.
This investor decided to use the fact that they got into a company that appears to be doing well to their benefit to almost fraudulently persuade limited partner investors to give them money. Here’s what they did: They blasted the market with emails describing how they “co-lead” this deal with us (they did not) and how they are planning to lead the next round with a $10 million+ check (which apparently they don’t have). They asked LPs to rush to get into their next side-car fund to have access to this great deal plus the LPs also get the “benefit” of investing in their next fund.
If you don’t mind investing in dishonest people perhaps there is still room for you in their round?
I couldn’t believe my eyes since the entire thing was such a fabrication and felt like it was bordering on securities fraud. In the email (I have seen a copy) was all of the companies performance data, revenue data, financing plans and company PPT decks, which is surely a violation of the confidentiality clauses of our legal agreements. They have listed forward revenue figures that are highly questionable and bring the issue of SEC oversight to my mind.
Let me be clear about this. I have publicly said many times that there is a positive to crowd funding. But I have always warned of the consequences of not very well regulated situations in wish investors (and even entrepreneurs) produce information bordering on financial malfeasance.
Is this investor on AngelList? You betcha. Does he blog about venture capital and try to advise entrepreneurs? Yes. Speaks on CNBC. Attends 500startup events. Has written a book on venture capital. I’ve never heard of him until now. But it would be super easy for him to represent himself to LPs and to entrepreneurs as an upstanding individual.
I was just super fortunate that since it listed our name in the email solicitation that an investor reached out to me to ask us about it. I was furious and although I have no intent of talking about this investor publicly you can be sure we won’t be working with them, recommending them or endorsing them with LPs. You can be sure that if the SEC decided to investigate we would obliged to point out the fraudulent misrepresentations that were made and I would consider it a public service to do so.
But here’s the thing. We could have easily never found out about this. We called the CEO immediately to find out whether he had any knowledge – he did not. He informed the investor that this was a violation of confidentiality clauses and we now have our company counsel reviewing the situation.
My point is this: As the number of funds that enter the market has dramatically increased the norms and behaviors of our industries will be put to tests. I know the temptation is to trust every investor – large & small – who gave you money when you were an early-stage startup. The reality is that you cannot. Major investor clauses exist for a reason. Protect your financial information wisely.
The wolves operate. And not only on Wall Street.
(Cross-posted @ Both Sides of the Table)
By Mark Suster on November 7, 2014
Last week a company we enthusiastically backed, uBeam, led by a very special entrepreneur, 25-year-old Meredith Perry, announced a $10 million round of financing. The press around the raise & company was fantastic and the promise of their technology – wireless charging that works as easily as WiFi – would positively affect many of our lives. What person hasn’t crouched at an airport to get 18% extra on one’s battery before boarding an airplane?
But then one person – who happens to be a physicist – wrote a back-of-the-envelop calculation of uBeam and said it’s not physically possible. His math was correct and I can hardly blame him for taking a guess at what uBeam does but every assumption that he used was wildly inaccurate. uBeam’s tech does work and I have safely seen it demo’d in the real life many times. Most of those that have been privileged enough to get a look at what they are actually doing have moved from skeptics to believers.
One is reminded of the famous quote often attributed Mark Twain
“A lie travels around the globe while the truth is putting on its shoes.” **
There is a battle between entrepreneurs who try to change the world and solve a meaningful problem and those who write take-down pieces with no apparent personal benefit other than attention. Here I make the case that entrepreneurs must stay focused on the prize, not the doubters. I make the case that optimism for new breakthroughs should be higher in the minds of those of us that watch from the sidelines rather than schadenfreude.
There are those amongst us the are willing to abandon the comforts of a job with a salary and perhaps the prestige of being able to tell family members, loved ones and friends that “I work for Google, Goldman Sachs, Apple, FedEx, Verizon or Coca Cola” and instead put out selves out there to potentially look stupid one day.
Working at a big company is honorable and I don’t believe the narrative that all of this tech disruption is to kill off big companies. Having a steady income and providing for a family is one of life’s highest commitments and honors. But for the group of people who are always talking about doing it but never do,. this sole act of being willing to jump ship separates “wantrepreneurs” from entrepreneurs.
Entrepreneurs accept that failure is a possibility but are highly motivated by not letting it happen to them. It can be one of the strongest motivators. Even bigger is the desire to stick one’s middle finger up at all of the people who doubted you all along. Who sat on the sidelines from the comfort of their keyboards risking nothing and criticizing everything.
Entrepreneurs are driven to pursue their passions no matter the personal costs, societal pressure, family head-scratching or financial consequences. They are driven more by the journey than they are about the destination.
I was fortunate enough recently to be invited to a private sitting with the president of South Korea, Park Geun-hye, along with 18 other entrepreneurs. She is trying to build a “creative economy” in South Korea and wanted to learn from some Americans what made us so innovative and what they could learn from us. I thought I was pretty sell suited to answer that question because having grown up in Northern California but lived and worked in the UK, France, Germany, Italy, Spain & Japan over 11 years I had seen quite a few societies and work environments.
I told her that I believed America’s best asset – driven initially from software innovation mindset in the San Francisco Bay Area and media innovation driven from Los Angeles – was our willingness to accept failure. If a society shuns people for TRYING you discourage people from creating truly breakthrough innovation out of fear of failure. The beauty of Silicon Valley and the ethos it has driven in all of us is acceptance of failure and a profound respect for those who at least try.
When I think about the people in our generation I most respect: Elon Musk, Larry Page, Richard Branson – they are optimists to a fault. They have a can-do attitude that is infectious. Who else would publicly try to launch people into space so that one day we might be able to fly people from New York to Tokyo in 90 minutes.
And in the tragic events of Virgin Galactic’s crash this week Richard Branson didn’t say, “yeah, it’s too risky, we were wrong” he said “Space is hard – but worth it. We will persevere and move forward together,” to which the CEO added “The future rests in many ways on hard days like this, but we believe we owe it to the team to understand this and to move forward. And that is what we’ll do.”
When Elon Musk set out to build SpaceX he wasn’t greeted with enthusiasm from the space community not used to having a private enterprise challenge the government funded space exploration of NASA. Now they are partners. Who in the auto industry believed Tesla, a totally electric car, was a good idea? The collective wisdom of the establishment to this huge innovation? Bubkis. Who else but an extreme optimist and entrepreneur could have imagined and then publicly spoken about “The Hyperloop” – a system of transport that envisages transporting people from LA to San Francisco in 35 minutes. Of course the naysayers are out again. I’d love even 0.5% of Elon’s ideas to come to fruition and let him fail on the rest.
No true innovation is ever accepted by the establishment precisely because it pushes the boundaries of what people think is possible
It was really gratifying to read Larry Page’s interview in the FT this past week. As you may know Google recently restructured so that Larry could spend more time on big innovations – on “moonshots.” In the article is cites:
Page estimates that only about 50 investors are chasing the real breakthrough technologies that have the potential to make a material difference to the lives of most people on earth. If there is something holding these big ideas back, it is not a shortage of money or even the barrier of insurmountable technical hurdles.
When breakthroughs of the type he has in mind are pursued, it is “not really being driven by any fundamental technical advance. It’s just being driven by people working on it and being ambitious”
People. Working on it. And being ambitious. And not enough capital embracing these moonshots.
Who amongst us originally thought “driverless cars” was a great idea? It is now seriously being talked about as a way to reduce the number of cars on the road, to reduce traffic & congestion, to cut back pollution and so forth.
Backbencher is a term from British Parliament to represent those that are neither in government positions where they have to enact policy nor in the opposition front bench positions of having to suggest counter policy. They get to sit in the back benches and holler at those in government about what fuck-wits the leaders are and how their do-nothing policies are ruinous to the people. Of course backbencher has also become a slang term for “someone who exaggerates their actual power, influence, or importance, usually for nefarious purposes.”
Backbenchers never DO anything. They get to sit in the back of the room, snicker, criticize and yet enjoy the benefits of our efforts. They aren’t just free riders. They are negative-as-hell free riders with no personal ideas for how to make things better.
Backbenchers love to criticize. It reminds me of Glum from Gulliver’s Travels (if you don’t know him do yourself a favor and watch this best of 60 second video), “It will never work.” “We’re doomed.” “We’ll never make it.” Anyway, an American my age will remember Glum vividly from childhood as the one who did nothing but always warned how everything was going to fail.
I wasn’t shocked this week after we announced we funded uBeam, a company that seeks to transfer electricity wirelessly to have some public Glum’s question its viability. In fact, the headline of one read, “How Putting $10m into uBeam illustrates everything that is wrong with tech investing today.”
Juxtapose this: Larry Page telling us we need more ambitious projects and one person with a blog writing a very negative take-down piece on a company that is truly innovative and trying to change an industry and free us from having to crouch in airport corners to get 18% more juice on our phones before catching out flights. Or trying to save old people from having to constantly change the batteries on their hearing aides.
To what point? What to gain from the cynicism?
In his post this blogger imagines the math of how uBeam works and says, “I’m no physicist – oh, wait, I am” to establish authority. Except that each of his calculations and assumptions about how uBeam works is totally wrong. That’s ok. He’s entitled to his speculation.
Here’s what you need to know for now:
- It does work. I have witnessed it working. So anybody telling you the physics is impossible is simply wrong.
- I did not lose my hearing. I was not fried. I was not scared. I was not scarred. It is safe.
- We hired outside experts. We kept our skepticism and like many who initially doubted we were convinced.
- We checked patents. We checked regulatory rules. We checked efficiency calculations. We checked safety. We checked charge times.
- Will it work at scale? Are we right in all of our assumptions and diligence? Time will tell.
But “what is wrong with tech investing today?” Give me a flipping break. If anything I’d like to fund 5 more teams and projects this ambitious. And if one of them succeeds it would have been worth doing. But my chips are in on uBeam and I’m not afraid to put my reputation on the line the same way entrepreneurs must each day.
Some people have publicly or privately asked me to define exactly what uBeam IS doing and why this backbencher is wrong. We will do that. Of course. When we ship product. And then feel free to judge the teams accomplishments or failures. I, of course, am betting on the former and am not 1% swayed by the doubters. If you have no doubters trust me you aren’t pushing the boundaries far enough.
But would you expect Apple to reveal its product details before launching? Would you expect Tesla to pre-announce what battery innovations they are working on? Of course not. And that’s why uBeam is rightly focused on perfecting their product, innovating, hiring and building for the future not on responding to every criticism from those without details of what we’re actually doing.
Should Elon Musk have responded early to the cynicism of Nasa or the Auto Industry or just delivered his products? Has any truly novel innovation ever been greeted with universal approbation before its ultimate success?
Heads down, entrepreneurs. Carry on, optimists.
“A feeling of enjoyment that comes from seeing or hearing about the troubles of other people.”
Schadenfreude is not an emotion I possess. What surprised me most about the post launch snipes at uBeam is not the doubting Thomas. 99% of the articles about the company were positive. The overwhelming public reaction was “hell, yeah, I’d love to be able to ditch the wires” yet some entrepreneurs and investors felt the need to quote this one blogger through authority of saying “See! Physicists say this isn’t possible!” One investor said on Twitter that the bloggers punchline of “I’m no physicist – oh, wait, I am” was “awesome.” I then reminded this investor that his firm was an investor in uBeam.
Do you REALLY know what uBeam’s plans are? Are you really so sure it can’t work? Do you really believe one blogger who uses wild assumptions over a company that has committed itself to innovation in this field? Are you willing to give them the benefit of the doubt? Leadership over backbenchers?
What makes America great, as I told the president of South Korea, is our willingness to accept failure. To root for failure is not what our industry does. It’s not what we’re made of. I know many people with physics backgrounds question how uBeam will work. But I can tell you from my experience in due diligence that many who have actually seen the company’s plans have changed their minds and now believe.
Time will tell. And I can’t wait to engage with all of you when we ship product. And I hope the skeptics will join in from a perspective of “how can we help?” vs. “how can we tear you down.”
I’m betting on success. Obviously. If I’m wrong? I stand by my decision 100% and will both look for equally ambitious future projects as well as be first in line to ask Meredith and Marc what they want to do next.
But to Larry’s broader point, “breakthroughs … are being driven by people working on it and being ambitious.”
Meredith Perry is 25. She has withstood 2+ years of backbenchers questioning what she’s working on. My experiences with her have been amazing. She never lost enthusiasm for her pursuit. She never lost confidence in the team’s ability to innovate and execute. She never got distracted from her core mission. She has never given up despite setbacks. The determination, grit & pluck are inspirational. I wish I had 20% of her confidence, focus and leadership skills at 25. The world needs more Meredith Perry’s, not fewer. Could you withstand the public scrutiny every day of being a young tech founder and show up every morning filled with enthusiasm?
Marc Berte, the CTO, and a masters from MIT, is exceptionally gifted. Of course we threw at him every skepticism of the market that we had heard or thought. What about loss of efficiency? What about battery charge times? What about safety concerns? What about competing patents. Of course we brought in outside experts. At each stage Marc and the team gave us confidence they really did have a novel approach and that it would work safely and efficiently.
Let’s embrace those trying to push the boundaries while acknowledging that many of them in the end will fall short. And then let’s dust off and get them working again on their next innovation. We’re an industry filled with naive optimists, with can-do attitudes and a desire to change the world no matter how many back benchers want to ridicule us for trying. Don’t join that chorus – even when companies do fail. Schadenfreude is such a terrible sentiment.
And for entrepreneurs waking up everyday to backbenchers public and private?
The doubters will question you. The trolls will swipe at you. Competitors will undermine you. These are the signs of innovation. Carry on
— Mark Suster (@msuster) November 1, 2014
** – While this quote is often attributed to Mark Twain, the great irony is that it appears that Mark Twain wasn’t the person who coined the phrase
(Cross-posted @ Both Sides of the Table)