Pigs get slaughtered: take the money when it's offered

Knowing when to sell and at what price is one of those questions that doesn't get talked about very much. In the game of business, success is measured by dollars. It makes sense that people are motivated by selfishness and "greed" and the general desire to improve one's financial standing. This isn't a bad thing -- it's what capitalism is based upon.  The danger for an entrepreneur comes when it comes time to sell part or all of their company.  The danger comes when an entrepreneur tries to over-optimize the value of its asset and thereby doesn't take a critical offer of money when it's offered.  In my mind, Friendster is the poster child of pigs getting slaughtered. This company had the opportunity to sell for 30MM in pre-IPO stock to Google but turned down the offer.  I bet the entrepreneur regrets that decision!
Recently, I've seen a case of an entrepreneur doing a great job tkaing the money to grow his business (I can't talk about the fiancing publicly because it's not announced yet). The entrepreneur realized in the rpocess of fund raising that they had probably under-priced the round by 20% but rather than go back and redraw the deal and screw it all up, he opted to plow ahead an dnow has the necessary (critical) cash to grow the business. And I have another friend who is selling his business for a price he knows isn't the best, but it will give him a really valuable win at a critical time in the market. Remember when the deal comes, the bird in hand is really valuable ....and pigs get slaughtered.

Have you stepped in dog shit?

I just went out to lunch and had the good fortune of stepping in some fresh, smelly dog crap. I cursed, stopped, took my shoe off, wiped the crap off, washed my shoe and put it back on and kept walking to lunch.  I smiled to myself as I thought about the shit storm that investors and entrepreneurs alike have been living through for the past 4 months or so. The metaphor of stepping in dog shit seems an appropriate one to share.  I'm witnessing people at the various companies I work with stop, swear and attempt to wipe off the shit.  Some are successful and seem to be walking forward.  Others are less successful and are still trying to get the dam dog doo off their company's balance sheet and p&L.  Losses are behind. You can't recoup them. Don't try -- it's likely to make the matter worse.  As soon as you can walk forward -- no matter how slowly and no matter how much cursing.

Let darwin solve the US auto industry crisis

I did like the idea I heard on CNBC last night.
The idea was a darwinian strategy for dealing with the auto industry debacle. Simple put, the 3 auto companies should be called together and told that the US government was going to give 25B to one of the 3 companies and the government was going to let the 2 other companies fail (or just not support them). The companies would have to go off and negotiate with unions, sub contractors and come up with the best plan to present to a panel of business execs. The winner of the contest would get 15B today and another 10 in 120 days if the company made progress on its plan.

Buy one Chrysler Avenger, Get one free

“Buy One, Get One Free” - That was the offer last week in the United Kingdom. But the two-for-one sale wasn’t for bags of potato chips or loaves of bread at the supermarket - it was for cars.

U.K. newspaper The Guardian reports car dealers across the country were doing the unthinkable to unload excess inventory. They were selling Dodge Avengers at 2-for-1. The gas-guzzling Avenger, made by Chrysler, has been one of the worst-selling cars in the country where gas will run you $5 a gallon (even with oil at $50 a barrel).

I read the above in a full article here over the weekend and thought it was worth re-posting. 

For what it's worth, I'm against the bailout or rescue (or whatever you call it) of the automotive industry. I have some understanding of how complex of a matter letting them fail is -- however, one can't get over the fact that the US auto companies fundamentally suffers from an inability to make cars customers like and will buy.  So, no matter how complex the failure of a GM or Chrysler -- the foundational problem is a company that fails its core mission -- its reason for being -- isn't worth saving.

I'd rather see the the monies that are being tossed around be -reinvested into the people that would be laid off.   Invest in a special re-training and re-employment programs. Give the employees a longer transition time because the economy isn't going to be able to re-absorb them quickly.  

Just my 2 cents from the sidelines.

Interview tips for CEOs of small companies

I was teaching a class at the UW last night and we had a interviewer from a big company come in to talk about how to conduct an interview. It was a great class and got me thinking about recruiting.  I've long seen recruiting as a critical job of a start up CEO.  And I'd thought share some of the tips from yesterdays class.
Note: The tips below are aimed at CEOs who are recruiting SVP and VP level positions as opposed to staff positions.

  1. Write the press release for the job first. This is something they do at Amazon....and it gets you thinking about one of the key customers of a senior level hire -- the press. It also helps you "vision" the gloating you might make from a great hire....and that's what you want -- a great hire.
  2. Write a solid job description -- these aren't exercises in beuracracy or tedium. They outline by what factors you'll assess a candidate.
  3. Focus on the soft skills as much if not MORE than the hard skills. Be specific about the soft skills when you interview.  When you say you want a leader who is open and hgih integrity. What exactly do you mean? 
  4. When you intereview a candidate -- don't make up your mind in the first 5 minutes. All you learn in 5 minutes is how you react to a candidate and whetehr you like them (which is important information) You don't learn whether they are qualified for a job or might just be different than you. 
  5. Some key skills to focus on :
  • ability to deal with ambiguity,
  • a history of demonstrating good business judgement (they're right a lot),
  • ability to see the big picture AND dive deep,
  • hire and develop the best team,
  • adaptive and flexible

Economic fear in the street

I've never experienced anything quite like today.  The stock market crash after Sept. 11 made sense. As a nation, we were under attack and people were scared. So most people sold stocks.  But the events of the last 2 weeks, and in particular today, are in an economic sense much murkier than those that followed Sept 11.   My question, is economic fear worse than physical fear? 
After Sept 11, people feared for the physical safety as much if not more than their economic safety. At the time, people were concerned about whether or not their would be a dirty bomb in NY or whether our ports were safe.  There also was a strong sense that terrorists were aiming to harm the US economically.  At that time, economically the US was resilient.
Today, things are very different.  People are scared. There's no credit. House prices are falling. Banks are failing. Money markets aren't safe. People are buying treasuries just because they are "safe".  People have lost lots of money lately but don't understand why. We're not in physical danger -- but the fear is palpable.  The "bad guy" in this economic situation is unclear and I think not having an icon to blame (other than "greed" or "wall street") makes everyone more scared. 
I'm wondering today -- is true panic around the corner?  And more importantly, will I be able to see it?

The 6AM Eureka moment

I got an email from one of my entrepreneurs today.  He had an epiphany at 6am. I was asleep. I read his short email and I have to admit I think that his insight is nothing short of awesome.  I can't reveal what company it is, who the entrepreneur is, or what the insight is at this time because I'm sworn to secrecy. That said, I love it when these insights happen.  In this case, the insight was a direct result of the entrepreneur living the problems of the market himself.  He was experiencing the pain everyday, and ultimately realized this morning that he could wake up and solve that problem for himself and in so doing, solve it for everyone in the market. Eureka moment.

Most common mistake made in negotiations

Simply put -- over optimizing.

It's common for everyone to try and get the best deal possible in a negotiation.  However, it's important to know when to stop negotiating, to say yes, and to get the deal done.

I'm currently in a negotiation which I think is falling apart because the entrepreneur is optimized the deal.  We had gotten to a point where both sides of the negotiation were equally uncomfortable with the deal and had agreed to terms. Then, the request for additional terms kept coming and coming. Each additional request was small in and of itself but when added to a deal in which both sides were uncomfortable -- one small request actually was the straw that broke the deals back -- so to speak.

Closing an angel round on friday

I'm in the process of closing an angel round for one of my companies today.  I was asked by one of the investors how the closing was going and I wrote:

Like any closing with angels ....

  • 60 percent close with no problem,
  • 30 percent close a day or two late, with little problem and a little massaging
  • 10 percent close in a week or more, with plenty of problems and lots of massaging.

Overall, I'm reminded of :

  • The benefits of working with institutional funders.
  • Never to try to close a financing on Friday.
  • The similarities amongst Angel financings and herding kittens (or greased pigs -- kind of funner image :-). 

Don't start a company in the local online space

I continue to get emailed and calls from entrepreneurs who see gold in the online local space. My advice to them is similar to the advice my dad gave me about going to medical school and becoming a doctor. Don't do it! He told me there are easier ways to make money and there are easier ways to care for people. He gave me that advice because he wanted to force me to think carefully about what my decision process.
Unfortunately he wasn't there to give me the same advice about starting a company in the local online space.  So I thought I'd pick up where he left off and take his place for all those internet entrepreneurs who think they can tap into the 90% of purchases that happen locally.  I believe in the market -- and think established companies will one day have huge local online businesses. Existing companies should absolutely be incrementing their way to satisfy the consumer need for local online resources. But start-ups should view this market place with caution and trepidation. It's quick sand.  It's a slog! There are easier ways to make money!   If you contact me and ask advice about your local online start up, that's what I'll tell you. 

Loving my job at Founder's Co-op

I'm loving my job at Founder's Co-op.  I'm busier than I've been in a while and am enjoying all that is entailed in the creation of this new investment vehicle. Meeting entrepreneurs, mentoring entrepreneurs, fostering the entrepreneurial community in Seattle, meeting with potential investors -- it's all play to me and it's my work.  All this makes for a happy person....despite the rain in Seattle.

golds gym customer service continues to suck

For those of you that remember my gold's gym customer service fiasco from a few years ago-- here's an update. I received a blog comment today with the advice "read the contract". It was a atandard cut and paste comment aime I assume at attempting to address the negative word of mouth that golds gym gets online. The email never said -- I'm sorrt you had a lousy experience-- we've changed and hope you'll try us again. That's all they need to say to get a second chance with me.
I wrote back to the email address on the log comment:
Reading the contract is good advice.

My advice to you is to do the same and take accountability for shitty customer service.

I'm not an ignorant or dumb customer. I have a graduate degree. I understand your desire to influence customer perception on blogs....but the best thing I can tell uyou is that in your processes of acquisition and employee trainoing you fail miserably.

Your email only serves to remind me of a horrendous customer service experience. One of the worst Ive ever had with a company (including the airline industry).

Customervice service rule.number 1 - the customer is right. Try saying sorry next time!
Andy

Introducing Founders Coop

I've been passionate about high tech start ups and entrepreneurs since my career started on the web with Firefly in 1994. How's that for dating myself -- and others who remember what and who Firefly was (the first commercialization of collaborative filtering).
Well, I've just co-founded a seed stage investment fund that focuses on truly being entrepreneurial friendly.  While that doesn't mean, I'll invest in your start up for no equity. It does mean that my partner, Chris DeVore, and I are entrepreneurs first and investors second.  We are not venture capitalists. I'm going to write a lot more about Founders Co-op in the near future. For now, you can read more about us here in the Seattle PI.

One more amazing note on apples retail store

I forgot to mention this in my previous post. I went to the store to exchange one product for another. I was escorted by one of the store greeters to one of the roving cash register clerks. These people roam the store with hand held cash registers. I was able to exchange the item without a problem. At the end of the transaction, the clerk asked if I'd like the receipt emailed to me. I paused and then promptly said yes. I gave them my personal gmail account. This makes receipt saving seamless and painless for me the consumer. It also builds a massive email list for apple. Win - Win ! Very simple and very smart....and surprisingly hard to accomplish in retail stores. I don't know of another firm currently doing this.