The Nantucket Conference has always offered great conversations with top-notch people. This year’s agenda and attendees are not exception. Several topics are very relevant to the current environment. Bob Metcalfe will be giving his favorite talk on selling and I will be leading an entrepreneurs’ luncheon on strategies for acquiring new customers.
As of Friday there were only 10 slots open. Act fast.
…then come to the cloud computing event I’m putting together with the MIT Enterprise Forum of Cambridge. Stay tuned for more.
This post was done through Drafty. You want to check out the cool image editing features.
My friend Marc Theermann, a veteran of the mobile space, has a tongue-in-cheek post about GM funding 10,000+ mobile startups as perhaps a better approach than shipping blah cars. There would be no talent or exits to make this work out (even if GM agreed) but the core idea of funding innovation as opposed to more of the same rings very true these days.
I’m all for dogfooding but not at the expense of deep competitive research. Sometimes you just have to live with your competitors’ products in order to understand them the way their customers do. I guess now that Bill Gates is focused on the foundation he is no longer interested in deeply understanding Microsoft competitors’ products. No other way to describe why iPhones and iPods are banned in the Gates household. What better way to learn about your competitors’ secret sauce than watch how your kids use their products?
Jason Calacanis has written a lengthy post with a lot of good advice for entrepreneurs who are facing the potential failure of their business. It has good tips for extending the runway and making do with less. It also has advice on orderly shutdowns, something which often distinguishes thoughtful, realistic and proactive entrepreneurs from the rest.
Jason, however, doesn’t address one important topic–when is it responsible for an entrepreneur to shut down well ahead of their runway ending?
This is a tough question that goes against the core entrepreneurial mentality of winning against all odds. So let me try this analogy… Imagine you are the commanding general of the Zugbar army. The Kleets outnumber you five to one. Your force is smarter, nimbler and more experienced. Your strategy is better. You can see how this battle and even the war are winnable if only a couple of things go your way. But they haven’t been going your way recently. In the latest battle, you are taking heavy casualties and can see the real possibility of a good portion of your force disappearing. Do you consider surrender to protect the lives of your soldiers? Do you hope for a Pyrrhic victory? How do you decide?
One of the core points of Jason’s post is that entrepreneurs learn the most from trying times and few times are more trying than when your business is about to die. I’m in complete agreement with this but I’d also argue that different stakeholders in a startup derive different amounts of learning and value from that experience. Overly focusing on the benefits to the entrepreneur is a selfish, one-sided way to look at things. A startup CEO has the responsibility to balance the various trade-offs.
Many startup employees take lower pay in hopes of getting some value out of the equity they hold. At a point at which the value of the equity is essentially close to zero, a CEO should think about whether these people are better served by having a job (an argument for the current times where there is a general shortage of jobs) or perhaps better served by being released of their loyalty obligation to the startup and enabled to seek employment elsewhere. This is not easy to communicate and explore while keeping the team motivated. As Jason points out, a CEO needs to have frank conversations with people at the company to understand what drives them.
Entrepreneurs’ responsibility to their investors is to be good stewards of the invested capital. This doesn’t always mean trying to figure out how much longer one can keep the company running. Sometimes, it involves realizing that the company doesn’t stand a chance and doing an orderly sale or shutdown + returning some of the invested capital, if any is left over.
This isn’t easy to do. It requires vision, humility, clarity and honesty which are not common. It’s much more common to hear an entrepreneur say something like “well, in retrospect, it should have been clear to me 12mos ago that we didn’t stand a chance due to the following macro-level issues in the market but I drank my own kool-aid and didn’t have my eyes and ears open to all the negative signs from the market”. This is a common problem. By definition, entrepreneurs are optimists. Add to that the basic psychological fact that humans tend to notice things that reinforce their pre-existing beliefs (and ignore those that challenge them) and you have one of the most common reasons for startups taking too long to fail. (Board members and investors are not at all immune.)
One of the hardest positions for a entrepreneur to be in is when they have to push a company forward in an attempt to generate some return for investors, knowing that there will be little to no return left for common shareholders after the exec team gets its carve out. I have talked to a couple of folks who’ve done this. They didn’t sleep well for a long time.
The economic and fundraising environments are very tough right now. When the going gets tough, it is especially important for entrepreneurs to think broadly about their responsibilities to the various startup stakeholders.
Amidst all the concern over targeted advertising and consumer privacy, I did a guest piece for Adotas on the need for a new model for targeted mobile advertising. Advertisers’ desire for more and more scalable targeted advertising is going to keep pushing the boundaries in this space. Consumer tracking and deep profile building, the core of behavioral targeting, have serious privacy implications because they can be misused. Greed and stupidity will lead to a string of high-profile privacy violations. That’s unless the advertising industry learns something from the nuclear power industry.
A nuclear power plant is a wonderful thing. Really scary, dangerous things happen inside nuclear reactors but only clean electricity leaves the power station. How? Through a strategy of containment–in short, concrete. Nuclear power plants need on average 190 cubic meters of concrete per megawatt of generated power. The lesson is simple. It’s OK to do some really dangerous things, provided that (a) you do them in a few known locations and (b) you take appropriate precautions to make sure that none of the bad stuff leaks out.
That’s my analogy for targeted advertising. It’s OK to do sophisticated consumer tracking and deep profile building provided that (a) it’s done by a handful of well-known parties subject to an appropriate level of scrutiny and (b) the services they provide to the rest of the industry, e.g., ad targeting, are certifiably clean, that is, privacy-safe.
The Internet is a lost cause. The cat’s out of the bag. TV and mobile still have a chance. Canoe Ventures is going after this for the cable guys. Who’s going to do it for mobile?
Founders often ask me, “If I own X% after my first investment round, how much will I be diluted through financings until exit?”. There are rules of thumb but there is no good data about what happens to common stock. So, why not survey entrepreneurs and find out? I’ve set up a simple survey using Google Forms. Share your story. I’ll publish the summary data.
By “Beacon 2.0” I mean the backtracking following the infamous change in the Terms of Service. From the founder’s blog:
A couple of weeks ago, we revised our terms of use hoping to clarify some parts for our users. Over the past couple of days, we received a lot of questions and comments about the changes and what they mean for people and their information. Based on this feedback, we have decided to return to our previous terms of use while we resolve the issues that people have raised.
That one was easy to predict.
