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Robert Scoble corners Ron Conway in the hallway and fires questions at him. Nice work. Ron is actually kind of optimistic about things (1-2 year recession) relative to others I've seen. Goes on to say that it's not like the last down turn in that some selective investment is happening whereas last time all investing stopped for a while. It's worth the 4 minutes to watch.
Today, LinkedIN announced the launch of 3rd party applications on their platform. It looks to be much more controlled than the Facebook platform (they are launching with just 8 3rd party apps plus one of their own). So far the applications are mostly focused on sharing documents and files.
The new apps are:
I'm going to check it out now, but based on the description, I'm loving it. Check out the video overview from CEO Dan Nye below.
UPDATE 1: Just installed a couple of apps. BlogLink works well. Also installed Reading List, Company Buzz and SlideShare...they all crashed so I can't say more yet. Here's the screenshot. Not what you'd like as your first introduction...
Last year I wrote about board management tips based on my own experience as CEO and that of a couple boards I was on on behalf of investors. Last night I attended an event put together by Clark Waterfall, a local headhunter (BSG Team Ventures), where about 30 startup CEOs spoke with each other about board issues.
It started out with a brief panel discussion and the panel consisted of:
By way of background, all three panelists are second, third or fourth time CEOs of venture backed startups. Novomer is an early stage (Series A) biotech company. Zipcar is a later stage (about $120MM revenue) and venture backed with an A-list investor group. And DigitalGlobe is a later stage company ($200MM revenue and recently filed their S-1). So here are some tips on startup board management from the panel and the other CEOs at the event (in chronological order of how they were discussed):
The session closed with a brief discussion about managing a board in an economic crisis. Nothing major came out of that other than the obvious point of get ahead of the issue in the short term propose an appropriate cost structure, particularly if that includes cuts and then address strategy.
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Jason Calacanis has another email on startups and the economic environment. He starts out:
[81-word quote deleted because of copyright protest filed by Calacanis with my blog host. Whatever. You can read the full email here.]
He goes on to describe a "Death Spiral." As an aerospace engineer and pilot I enjoyed Jason's aeronautical metaphor (a pilots physical senses are of no use in a death spiral and the only way out is to believe your instruments). He goes on to describe an economic death spiral in which companies cut costs and lay off employees who in turn belt tighten and so on. This emotional reaction will over-correct until even the wealthy are cutting back and that will be reinforced by the media.
How does it stop? Jason writes about how slowly some individuals will start to see opportunity after competition has been eliminated and they'll start to make some cautious moves. Eventually others will see this opportunity. The key? When your dentist starts investing again.
Jason writes about some bits of good news:
Jason concludes that the best investor today is yourself. I wholeheartedly agree. Why depend on others if you can fund yourself.
It's pretty rare that during a crash and recession there are employees
and managers with recent experience on how to handle the situation.
Well, the "good news" with the Great Depression 2.0 is that a whole
bunch of us have relatively fresh experience. Last time the financial
grenade went off in our lap. This time, we're collateral damage, which
means it should be less painful assuming similar size crashes (which is
looking less and less like a valid assumption).
In any event, here are some lessons I learned from the last time through this mess:
Most people will tell you that unless you already have angel or VC funding today, there's no chance of raising money in the short term. They continue by saying that these angel- or VC-backed firms are the "lucky ones." Maybe. I actually think that the folks who have a business buy don't have the pressure of lots of shareholders, a big board and a high burn rate are the real lucky ones. Remember that these venture backed companies may actually survivie, but the real question to ask is which companies are most likely to have a good return for Common.
The latest version of this annual comp study compiled by J. Robert Scott in collaboration with Wilmer Hale, Ernst & Young and Prof. Noam Wasserman at HBS is out. If you haven't heard of this report before, I've been writing about it for a while. It is by far the best source of compensation data for startups. The report is a result of a survey of 340 venture-backed startups in the US. The report details compensation for the top 10 or so executives and cuts the data by geography, revenue, headcount, industry segment and more and includes ranges for salary, bonus and equity. You won't find a better source.
In 2008, base salaries are up about 5% over 2007 but bonus payouts remain flat. Equity compensation is hard to assess on average, but it looks like it's about the same or slightly less.
You can get a summary of the report from the comp study website. The unabridge report is very detailed (70+ pages). If you're interested in a copy, email me email Noam who will send you one if you commit to participate in the next survey.
There is a point here, so please bear with me...
First, some background.
You probably already know that Hernán Cortés was a Spanish conquistador (in)famously known for burning his ships upon arrival in the New World to eliminate the possibility of retreat by his men. Heck, what's a guy to do when you have just 600 men and your mission is to conquer a civilization of 5 million?
Once again, here is a list of some of the more popular posts on this blog. The two most popular posts are relatively recent ones: this one on term sheet negotiation and this one on venture debt. I'd like to take this opportunity to thank all of my readers, particularly those who have voted, commented or contacted me about this blog...your interest is my motivation!
Raising Capital:
- 5 Reasons Convertible Debt Sucks HOT
- 10 Tips On Negotiating With VCs NEW
- Dating...er...Fundraising Etiquette
- The Science & Art of Term Sheet Negotiation HOT
- How Liquidation Preferences Work HOT
- How Much Money Should I Raise? NEW
- How To Get Introduced to VCs
- How To Pitch To VCs
- Killer VC Pitch Deck NEW
- Top 10 Tips For Entrepreneurs Pitching VCs
- Top 10 VC Objections (And How To Overcome Them) NEW
- Triage NEW
- Venture Debt For Startups HOT
- What To Expect In Due Diligence HOT
- Why Dividends Matter HOT
Startups:
- 'Tis The Season To Change The CEO
- 10 Things To Consider Before Joining a Startup
- 10 Web 2.0 Tips: $75 HOT
- All-Hands Team Meeting NEW
- Board Management Tips For Startup CEOs
- Customer Support 2.0
- Financial Modeling Tips For Early-Stage Startups NEW
- Hiring Your First Salesperson
- How To Demo Your Startup NEW
- How To Pitch The Press
- Interview with Professor Noam Wasserman
- Sales Learning Curve
- Startup Compensation HOT
- Startup Entertainment
- Strategies For Two-Sided Markets
- What To Include In A Board Package
An uptick in sales leads is not necessarily going to convert to more sales. If your webinars are attracting a lot of attention, it doesn't always mean customers are interested in buying. When the economy turns bad, big companies cut discretionary spending first and then later they come back to cut headcount. In the interim, there are a lot of employees with nothing to do except "test drive" new products and services.
Instead, watch revenue and sales cycle. Those two are the leading indicator of things to come. Sales leads could actually tick up in a down economy but that is most likely misleading.
Right now in board rooms across the country, nay around the world, the equivalent of battlefield triage is being conducted.
Venture capitalists are going through their portfolios and categorizing their investments into three buckets:
So which category is your company in? If you're in the "routine" bucket you probably know it. But if you've got little or no revenue, your monthly burn is $400K, $500K or even $1MM or more and you have just a few million in the bank, then it's probably not clear if you're "expectant" or "priority" from your venture investors' point of view. And knowing the difference has big implications (morphine or a lifeline).
For venture investors, the first (and probably most important) filter is "runway" (i.e. amount of time existing cash will last assuming conservative revenue projections). If runway is more than 12 months, for the time being you're in the "routine" bucket (although make sure you are really conservative on your revenue projections).
If your runway is less than 3 months and you don't have other factors in your favor then you could be in the "expectant" category. My view is that companies with real promise and runway between 3-12 months will get the "priority" classification.
There are obviously a lot of other factors that get considered...I'll try to address those next.
While the press in the US is obsessed with the market crash and its impact here at home, something not covered (in US main stream media) is that the rest of the world blames us for the current financial crisis. I wouldn't be surprised if citizens and governments of other countries took a small bit of pleasure in watching us implode.
Time to get to work. We've got to dig in, take our medicine and dig out of this hole. We have to hand a better country to our kids than this.
Today I have a little more confidence that we actually will survive this mess. Why you ask?
I was reading a brief WSJ biography of Neel Kashkari, the 35 year old former Goldman Sachs banker who is now in charge of implementing the $700 billion bailout of Wall Street. Apparently he was trained as an electrical engineer at the University of Illinois, worked on a space telescope, among other things, and then went to Wharton for b-school before joining Goldman.
But what really jumped out at me was that he was on the solar car team at Illinois. The WSJ explains:
Goldman’s investment bankers were most impressed by Kashkari’s science background. His experience working on the James Webb Space Telescope for NASA contractor TRW gave him a comfort with technological jargon that would help Kashkari communicate with technology-company executives. Kashkari also spoke passionately of his entry in a car competition, the 1997 Sunrayce event in which Kashkari’s team built and raced a solar-powered car. His team didn’t win, but it did earn kudos. While other bankers at Goldman would often discuss their project du jour or details of a presentation even in their off-time, Kashkari often discussed cars and the Sunrayce experience.
As a fellow raycer (University of Michigan solar car team), I totally get how a project like this can stay with you for a lifetime. I would say most of my entrepreneurial skills came from my work on the Michigan solar car team (you can read more about the project on this Wikipedia page on my team).
Solar car racing has been around since 1987 with the first race in Australia and the sport came to North America in 1990. There have been 9 races here since then (and I'm compelled to mention that Michigan has won 5). Each race is typically held in stages over the course of a week; typically 1,000 to 2,000 miles in total. To give a little context, the 1993 Michigan team consisted of more than 350 students who volunteered over 100,000 man hours and raised $2.5 million over 3 years to design, build and race the car. It was basically a startup business.
I remember saying on a television interview during one of the 1993 races that the "real product of the solar car team wasn't the car or the race, but it was the legion of students that get valuable experience that will serve them for a lifetime." I said that 15 years ago...who knew that a fellow solar car raycer would have a chance to actually save the world?
PS, One other nifty little tidbit from my solar car days is that Larry Page was on my solar car team. So you could say that I'm one of like 3 people that Larry has ever worked for....nice!
Until relatively recently (July 2007), equities markets in the US had something called the "uptick rule" which means that you couldn't short a stock unless the immediately preceding transaction was at the same or higher price. The rationale of this rule is to prevent a run away downward spiral in a stock (or stocks, as the case may be). Most other major markets have an uptick rule and in fact the US banned short selling altogether last week (the ban of which expired today).
I actually think we might need a "media uptick rule" imposed on an emergency basis that can stabilize confidence. This rule would limit negative media news to something like 30 minutes per day unless the previous day's news was the same or better.
Think about it. Why are people afraid of guns and airplanes when swimming pools and cars are far more dangerous (check out Freakonomics if you don't believe me)? It's in part because of media attention. I could give another metaphor about timeouts and my 2 year old son, but you get the point.
Talk about a steady hand during a crisis...
Check out this post by Roger Ehrenberg an angel investor in NYC. He lays out what kinds of companies he invests in. Roger is spot on.
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