Seth Levine's VC Adventure

“Seth can’t take your call right now . . .”

I have a few pet peeves about personal business habits that I've joked about in the past (see How do you sign your emails and Where was that you went to school, for example). Here's another one that's been bugging me lately: outgoing voicemail messages

With apologies to my many, many friends who do this, it really bugs me when people have their assistant leave their outgoing voicemail message. I get it – you're busy; you're very important; you have an assistant; you don't really have time in your schedule to deal with things like setting up your voicemail. But really? Do you honestly not have the 30 seconds it takes to set up your own personalized outgoing message? Or is it that you just can't figure out how to do it . . . ?

And while I'm on the topic of voicemail, how about not setting your outgoing message to the automated "John Smith" . . . "can not take your call right now. I'm the guy who always gets tricked by this (often multiple times by the same person), thinks you've picked up your phone and starts a conversation with your voicemail before the systems completes the message and I realize I'm just talking into the air. It does not make me feel very smart . . . although I still feel smart enough to set up my own voicemail <g>

EOR

Explicit Behavior

Atul Gawande has an outstanding article in this week's New Yorker entitled "The Checklist" (full article available) that describes how explicitly defining the steps in complex processes (and then following those steps religiously) significantly reduces errors in certain intensive care procedures. Creating explicit checklists of steps for common ICU procedures resulted in far fewer infections and other complications and an unbelievable amount of money and time saved (not to mention the number of deaths averted). It's truly mind boggling and a great example of Occam's Paradox, which I wrote about a few years ago on this blog (for those of you who don't want to link through, Occam's Paradox is the idea that while the "challenges we face in life and business [may often be] complex – the solution to those challenges generally are not"). It's a reminder that in many cases making behavior explicit rather than relying on memory, intuition or guess work ultimately saves time and results in greater accuracy. As the article point out, airplane pilots figured this out a long time ago. Doctors are apparently just waking up to the idea. Perhaps it's time for the rest of us to start thinking about it.

When you know it’s not right . . . it isn’t

"When you know it's not right, it isn't."

A fellow board member said this to me a few months back and I wrote it down as something I wanted to remind myself of every once in a while. She was referring to the human tendency to act slowly in the face of clear evidence and in particular to venture capitalists' reluctance to be decisive. While I don't fully subscribe to the "Blink" theory on decision making, I find it excruciating when decisions are drug out unnecessarily. Don't do that.

How much is that meeting costing you?

So now that you are arguing for consensus at your meetings rather than arguing to win, how much is that tete-a-tete costing you anyway? Here's an amusing answer to that question. I just ran a hypothetical meeting with a VP Sales, COO and Director of Biz Dev. They couldn't agree on anything and our meeting ballooned into an hour long discussion. The grand total? $169.56. A waste of time and money . . . hypothetically speaking . . .

Arguing to win

Someone recently told me about being stuck in a group where people were arguing to win, rather than arguing for consensus. Whatever it was they were talking about didn't get solved and a bunch of people left the meeting annoyed. I've not heard anyone describe the difference in debating style to me in this way before and think it perfectly captures a huge distinction in the polar approaches some people bring to a group decision making process.

On the one hand, you're already right, don't want to hear about what anyone else says and your only goal is to get the group to make your decision. You probably don't hear a lot of what other people say, because you're too busy coming up with a response to the stupid point they just made rather than listening to their reasoning.

On the other hand, you want to make the best decision possible, don't have to be the smartest person in the room and realize that other people bring different backgrounds and experience to a discussion.

You tell me which one results in a better decision (not to mention overall experience) . . .

1980’s all over again

I've written a few posts about my general concerns over our economy (we save too little, have too much debt, etc.). I've received my fair share of feedback that outlined all the reasons why the world had changed, that certain leading indicators no longer mattered, etc. That's all wishful thinking in my mind – we live in a world of real and repeatable cycles. And while overall the global standard of living has gone up over time and the duration of our periods of growth have lengthened, our economy and the world economy is cyclical and generally speaking follows repeating (if not predictable) patterns.

With that as a backdrop, I was fascinated by a Merrill Lynch report (see 1980's Redux) which compares trends in some key economic indices today and from the 80's. While the world is without question a changed place (and thankfully the economic downturn in the early 90's was short-lived, relatively minor and followed by a sustained period of growth and prosperity) it's still wise to at least pay attention to history. Click through the link above – just looking at the graphs will give you the right picture.

One thing I hope does not come back is my late-80's hairstyle . . . attached here for your viewing pleasure (that's my sister with me in the picture with an admittedly big, but much more respectable, style).

StubHub Rocks

Brad put up a post last night about how tight StubHub is (see "StubHub Seriously Has Its Act Together"). I promised a post on my rockin' StubHub experience buying tickets to Game 4 of the NLCS in "Jumping on the bandwagon" so here goes:

The thing about specializing in a specific vertical is that if you get it right, the experience is worlds better than your generalist competitors. When StubHub was started conventional wisdom suggested that eBay had a lock on all things auction. But it turns out that there are plenty of very specific niches for which the eBay one-auction-fits-all model falls short. Ticket sales is clearly one of them. If you've ever tried to buy or sell tickets on an eBay auction you know exactly what I mean. Tickets to an event are a highly specialized good – every ticket is not the same (each seat is different and each venue is unique in its seat layout), events are time specific (i.e., they occur at a very specific date and time before which the ticket is valuable and after which the ticket has zero value), there are major logistical challenges with shipping around tickets and ensuring they get where the are supposed to get when they are supposed to get there, and there are significant challenges in dealing with last-minute purchases (transferring the ticket from a buyer to a seller hours or minutes before an event).

Enter StubHub who seems to have this process completely wired.

I hadn't even thought of trying to go to game four of the NLCS until the morning of the game when my wife suggested that I try to grab tickets and take my dad. I've used StubHub before so I quickly headed over to their site. I hadn't seen the cool mouse-over stadium map that allowed me to quickly figure out the range of ticket prices and seating options available (all without clicking and backclicking, which is a major pain). Three clicks later I had purchased 2 seats to the game about 30 rows up behind 1^st base. StubHub has ticket pick-up offices set up near many major venues. In the case of downtown Denver they use a temporary space in LoDo to distribute tickets bought too close to event time to ship them around via FedEx. I arrived right as the office opened and was a little dismayed to see about 200 people already ahead of me. But dealing with large numbers of people descending on a single venue and attempting to pick up their purchased tickets is clearly something StubHub has figured out. Five minutes later I had my tickets in hand and was off to dinner with dad. I watched throughout dinner (which was at the restaurant next door) as the StubHub line snaked around the corner but moved steadily for the 90 minutes. I wouldn't be surprised if 5,000 people (about 10% of the stadium) purchased their tickets through StubHub for this game (they even had computers set up in the pick-up office for people who had procrastinated their purchase until game time).

All I can say is wow. . .

“Everything just works”

On a recent trip to Chicago I had the chance to visit Dick Costolo, former CEO of FeedBurner and now proud employee of Google. Brad and I took Dick out to a congratulatory dinner. Before we went out Dick gave us a tour of Googleplex Chicago. As we walked around the impressively decked out office (200 inch screen in the presentation room? Wow!) he told us how smoothly the operations ran at Google. "Everything just works" he said, demonstrating the video conferencing system. On top of that, the systems in the Chicago office are exactly the same as the systems in every other office. Learn how to do something in Chicago and you know how to do it in Palo Alto, Boston or Munich. Most of the offices even have the same look and feel. While it may be a bit formulaic, it's productive. And clearly Google is all about maximizing the productivity of its staff. That . . . as well as the fact that they actually had a working video conferencing system that required no IT staff to actually set up a video feed . . . is pretty impressive.

Here's a (really fuzzy) picture of Brad and me in the lobby just before leaving:

Peripheral vision

One of the great challenges of business in general and smaller, fast growing businesses in particular is figuring out the balance between near term focus and long term vision.  While all companies become slaves to the calendar (striving for quarterly sales targets, specific product release dates, etc.) too many never look up to see where they are really headed.  I'm not talking about making sure you have the latest IDC report on your industry on your bedstand, I'm talking about having a meaningful understanding of your business, you competitors and spending real time focusing on how and where you are going to take your company.

The typical paradigm for this is wrong, in my estimation – and most companies that I've seen are missing the boat.  Companies spend almost 100% of their time focused on the here and now and designate only discrete periods of time on future planning (their annual strategy session, at the board meeting where they review their next year's plan, etc.).  To borrow an analogy from mountain biking (sorry – cycling season is in full force and it's on my brain), companies need to be focused on where they are headed, as opposed to where they are, and use their peripheral vision to avoid current obstacles.  In cycling you look up trail – focusing not on what you're riding over at the moment, but what you're about to come upon (and by the time you're there, you're focused on the next thing).  The faster you're moving, the farther ahead you need to be looking (because it's on you before you know it). 

Management teams that get this right are consistently engaged in conversation about the future of their company and industry.  Product strategy discussions are broad and include not just product management and engineering but executives from across the company.  Feedback from customers is not siloed in sales, but is shared across an organization.  These companies have regular time set aside for execs and employees to spend unstructured time together taking about what's working in their business and what needs improving; what customers are asking for; what their competition is doing; what the trade press is writing about; what would be 'cool' to include on their product wish lists; what's not working in the business; etc.

This activity doesn't replace knowing where you are (your peripheral vision is important) but better informs where you are by knowing (really knowing) where you are headed.

Patent sanity

Brad has a nice series running on patents which I've enjoyed a lot (I think the existing patent system is completely hosed, totally ineffective and open to blatant abuses of power – see this post from Jason for the perfect example).

Well today, there's a glimmer of hope that change may be on the way as the administration and it's head patent policeman Jon Dudas announced the intent (note the gap between intent and action, but at least it's a first step) to reform the patent system. While I generally like the idea of requiring patent filers to include more information on why their invention is 'novel' the gem for me in today's announcement is the idea of opening up patents to more of a peer review. What a novel idea – have people who are actually in a particular field help determine whether an idea is truly novel and therefore patentable. In a system where the average patent is looked at by an examiner for about 7 hours before being approved (and where the default behavior seems to be "assume this is novel until proven definitively otherwise) far too many patents which are both obvious and not particularly original are being issued.

While I don't think software patents will ever be outlawed, perhaps the PTO will someday go the next logical steps and more significantly tighten up the requirements for issuing a patent (and issue far fewer patents) and completely abolish method patents all together (ok – I'm deluding myself on that last one). I'm hoping today's announcement is a step in that direction.

If you have a minute and are looking for a laugh, check out this list of patents actually issued by the PTO – I particularly like the electrified table cloth (to keep bugs off your table, of course). Why didn't I think of that one?!?

Thanks to Brad for pointing me to the article – I'm sure he'll have his own post up about this move in the right direction when he gets back from a few days unplugged.

$1

Would you work for $1? Here's a few people who do.

Delivering bad news

Let's say you have some bad news to deliver to your board/investors. For example, you lost a huge customer or your software has a major bug that's going to set you back 6 months or your CFO just got arrested for cheating on his taxes, etc. Should you:

1. Take out an advertisement in the Journal announcing this and then send out a note to your board with a link
2. Rent one of those sign trucks and have it drive by your investors offices repeatedly
3. Bury it deep inside a board book and hope no one notices it
4. Don't say anything – your investors/board are too involved in your business already and ask way too many questions as it is
5. None of the above

This won't come as a surprise to regular readers of this blog, but my suggestion (strong preference, actually) is that the companies I work with be direct about news – good and bad. If you're just before a board meeting, include the news in your CEO letter that prefaces the board material (see my post on running better board meetings for more detail). If you're not, either call your board directly or send an email around updating everyone. Better yet – do both.

I received a board package the other day (not for any of the companies listed on my left nav bar – this was for another company I'm helping out with) that contained material bad news (they lost an important customer and as a result, significantly changed their cash outlook for 2007). However this news was completely buried in the board package. Everyone found it and called it out before the board meeting, but I wonder how it might have come up if the board hadn't been diligent and picked up on it. The company clearly wasn't trying to completely hide it (it was there in black and white) – they were just trying to somehow obfuscate the issue by making it hard to find. The irony was that losing this customer was not entirely unexpected and we'd already discussed contingency plans. I have no clue why they didn't highlight it as a major topic for the meeting …

Clarity

I was on a call recently where I had to ask someone 4 times to repeat what they were saying using more exact terms.  It's a major pet peeve of mine and so prevalent I'm losing my ability to be nice about it.  Perhaps it's a result of being a kinder, gentler society or maybe it's just because we've all sat through too many PowerPoint presentations or maybe we're all testing our political-speak skills, but whatever it is the result is the absolutely maddening trend of people not saying directly what they mean and forcing the rest of us to play 20 questions to tease it out of them.

Here's an example:

Direct description:  This is a red circle

"Business" description: The object displays certain characteristics that you might find in areas that were prone to liking colors that were deeper and brighter in tone.  I also note that the object is rounded on four sides.

 

UGHHHH!  I know you know exactly what I'm talking about…

When you know it’s not right, it isn’t

 

When you know it's not right, it isn't.

A fellow board member said this to me the other day and I wrote it down as something I wanted to remind myself of every once in a while. She was referring to the human tendency to act slowly in the face of clear evidence and in particular to venture capitalists' reluctance to be decisive. A good thought to ponder.

Quote of the day

"Successful people spend the majority of their time on major things.
                Unsuccessful people spend the majority of their time on minor things."

Relayed to me by my good friend Chris, who is dutifully following this advice...

Fire Fast

My last post generated a bit of harsh comment (a few on the site, but many more in private e-mail and on a few other sites that picked up the theme).  Apparently I came off as pretty insensitive (perhaps ‘jerk’ would be an appropriate description) in how I described my approach to some of the “can I get 30 minutes of your time?” meetings that I seem to have a difficult time saying no to (note to commenters: I do see value in the meetings and as a general rule spending time getting to know as many people as possible. Hey - at least I TAKE the meetings . . .).

Trying to roll with that theme, I’ve been thinking recently about how companies get rid of non-performers. I have a lot of visibility into the performance of most of the executive teams of the companies I work with and some visibility down the ranks.  One thing I’ve observed over and over and over again is that companies tend not to fire fast enough.  I understand that US employment law can make this difficult (I am NOT giving legal advice here, so don’t take this as such in any way shape or form), but regardless, companies tend to hold on to people too long.  This is true both in terms of mass lay-offs and more disturbingly in the case of non-performers.  This is true almost 100% of the time and often in the face of extraordinarily clear evidence that supports the decision to ask someone to leave.

I’m not trivializing firing people – it is and should be hard (I vividly remember the first person I let go crying in my office; it was extremely uncomfortable and I felt terrible for this person who was a great employee, but whose position was being eliminated).  But if you really care about running an effective organization, own up to making a bad hiring decision and take out the red pen. Keeping people around too long ultimately only damages an organization (particularly when their lack of performance is obvious to all around them) and delays the inevitable. 

Why are we here again?

I should probably do a better job of controlling my meeting schedule. I don’t and as a result end up with too many ‘networking’ meetings (i.e., where I’m on the receiving end of the networking).

I have two observations about these interactions:

1) Left to their own devices, people tend to ramble . . . ramble . . . ramble. The conversation lacks focus, direction and purpose. Sometimes this is fun; most of the time it’s a waste of time.

2) Most people don’t seem to know what they want to get out of meetings like these. This clearly contributes to the rambling – there’s no focus because there’s no clear end point or goal.

To speed things along a bit, I’ve been starting these meetings of late with a simple question: “What do you want to get out of this meeting”

Turns out this isn’t something that most people come prepared to answer, which I think explains why I was encountering the two problems described above and reinforces the need to start meetings this way.

I’m starting more and more meetings with this question (or the answer to it if I’m the one initiating the interaction) – not to be callous, but to get things started with an outcome in mind. Plenty has been written about how to make meetings more efficient, but for me, other than skipping them altogether (which tends to make them much more efficient – at least for me), this has worked better than just about anything I’ve tried to speed things along. Especially those pesky “networking” introductions . . .

This post reminds me of my Networking 101 post from last year. Worth taking a look at if you haven’t read it yet. See point 3 for another description of what I’m talking about here.

TLAs

In a recent note Bill writes:

I love your blog, but if you’re going to use TLAs (three letter acronyms), you need to spell out the first reference so the uneducated (like myself) know what you’re talking about. When you write about NOLs, us neophytes from Colorado think you’re talking about spending three days alone in the wilderness. ;-)

He’s right. I sometimes forget how insular venture/finance/technology can be. In one of my very first ever business experiences - a training session at Morgan Stanley - I spent an hour listening to a Morgan associate (who happened to be the assignments associate from the group I was about to start working with) talk about the “Morgan way of doing DCF analysis” all the while thinking “I’m totally screwed. There are 100 people in this room and I’m the only one who has absolutely no clue what DCF stands for, let alone whatever subtlety he’s talking about that is the ‘Morgan way’.” (Turns out DCF stands for discounted cash flow analysis – something I have gotten intimately familiar with over the years). 

Thanks for the reminder, Bill. If people don’t understand what we’re talking about we’re not really very effective. Good to keep in mind.

What DON'T you do?

Companies -  and start-ups in particular - spend a lot of time working through market analyses, product positioning and the like, trying to figure out how to tell the world what it is that they do (and differentiate that from what everyone else does). It is, of course, a very worthwhile and important effort. 

One thing few companies spend much time on, however, is the opposite question – what do you NOT do. Not the broad question of what you don’t do (we don’t make toasters is not very helpful), but focusing in on the gray areas between what you clearly do and clearly don’t do and deciding where you draw the line. I watch companies struggle over decisions (product extensions, sales targets, delivery methods, etc.) or get slowly pulled off track as they chase down revenue and partner opportunities that are just a little bit off track (enough to reap havoc across an engineering or delivery organization, but not enough to be clearly out of bounds). 

Have the conversation first – know what’s in bounds and what’s out of bounds and how to tell the difference. 

Feedback

There was a great article in last weekend’s New York Times Magazine by Stephen Dubner and Steven Levitt (of Freakonomics fame) that talks about the role practice plays in becoming truly great at something. They walk through research that suggest that while people clearly have some natural level of ability or affinity towards certain skills, it’s the hard work and dedication they put into the practice of their chosen art that ultimately sets them apart. There’s a feedback loop here – people tend to work harder at those things that they are good at (because they enjoy it more).

There was one paragraph in particular that struck me and it relates to something that I’ve been thinking about that every business does, but most in my view do poorly.

Deliberate practice entails more than simply repeating a task — playing a C-minor scale 100 times, for instance, or hitting tennis serves until your shoulder pops out of its socket. Rather, it involves setting specific goals, obtaining immediate feedback and concentrating as much on technique as on outcome.

If you believe this, then you have to scratch your head at how most businesses and managers offer feedback to employees – through annual or semi-annual reviews. There are two problems with this approach: 1) the feedback is stale (and negative feedback easily rationalized by its recipient as memory fades and more importantly the time for correcting poor performance or reinforcing good performance has long passed); and 2) its generally tied to a conversation around compensation – either an annual bonus, pay increase or both.

Rather than limiting the majority of feedback to a review period, try giving more consistent feedback (both positive and constructive) on a more regular basis. Get out of a presentation – talk about what worked and what didn’t; finish a sales call or demo, figure out what seemed to resonate with the customer and what can be improved; feel someone in the company did an outstanding job with a task – let them know why it worked so well. Equally important, reviews should be about reviews (and what I’m describing above shouldn’t replace a more formal review process, it should supplement and feed into it). Comp conversations should be about comp. Obviously they are related, but its much more constructive to review an employees performance when the outcome of that meeting isn’t about money (but rather about the improvement of performance).

How do you sign your e-mails?

For some reason I’ve been paying attention lately to how people sign their e-mails and thought I’d throw out a few thoughts. I’d be particularly interested to hear from people on the strangest sign-offs they’ve received.

Below is a list of some of the more common sign-offs along with my take on what they really mean.

• Cheers! – I’m cool!
• Best – I don’t want to be locked into a specific sign-off – please interpret as you wish (best wishes, best regards, best cheers, etc.)
• All the best - When “Best” simply isn’t good enough
• Ciao! – I’m cool! and trying to act foreign
• Sincerely – I took this really great business writing class in high school
• Thanks – I really do mean thanks (when used correctly) / I can’t think of anything else to say (when used incorrectly, for example at the bottom of a flame e-mail)
• Hope all is well – Please DO NOT write back with details of whether you are well or not – I’m just trying to be polite
• Warm regards – I’ve just returned from my latest analyst session and am feeling pretty centered
• [nothing but your name] – Sometimes less is more
• [not even your name – just your full signature] – I’m so efficient/important/etc. that I don’t have time to even type in my name

With my very cheeriest and best thanks and regards.  Here's hoping all is well

                                        Sincerely,

                                                seth j. levine
                                                mobius venture capital

Where was that you went to school?

I’ll admit that I have a bit of a complex about business schools. I never went (sorry – no “Seth J. Levine, MBA” on my business card . . . ) – probably because all of the schools I wanted to go to wouldn’t accept me for college, so I don’t see any reason to give them money for business school. Plus it was the rock and roll late 90’s and I still had dreams of getting rich in the internet bubble (which I did not, although I do continue to receive class action notices for various companies whose stock I owned at the time, much to my amusement).

So with that as my clear bias, I have a pet peeve to share with you.

I understand why many business schools are named after rich donors (in the same way that many cultural institutions have wings or buildings named after people who gave money in support of them), but why is it that someone tells you where they went to business school, they never actually tell you the name of the school the went to? I think it must be like a fraternity handshake – referring to schools in code. Personally, I think it's annoying.

No one went to Dartmouth – they went to “Tuck”; same is true for UVA (“Darden”); ditto Penn (“Wharton” – this one is even used by undergrads who studied business there); the list goes on.

Even schools whose name is in the name of their business school name have to use code (does anyone say they went to business school at Harvard? No – they went to “HBS”). My all time favorite is Stanford. No one goes to Stanford business school – they went to GSB (which is short for Graduate School of Business – said in a way to indicate that really, this is the only graduate school of business in the country worthy of having gone to, so why identify the actual school – everyone will understand).

I think I’m going to start telling people who ask that I went to BSOTDCB (business school of the dot com bubble), and then look at them with a blank stare when they ask me what that stands for (and in “DUH. Don’t you already know?”).

Good point, Jeff

Maybe this is the reason for so many amusing company names.

Follow up to "What's in a name?"

You can see from the comments to my post on company names yesterday that I actually heard from many of the companies listed (a few wrote me directly and don’t show up on the comments roster, but 3 commented directly). I was actually highly amused by the e-mail exchanges I had on the topic – everyone took it in stride (and thought it was extremely funny).

It did get me thinking about how fast information travels in a WEB2.0 world. With one exception that I'm aware of, the people who contacted me were not a regular reader of this blog (despite my wishing that my reach was really that far . . .). Still within a few hours, they had all been alerted to the fact that I had posted about them.  There are no secrets in a world that connected . . .

I suppose the downside to having a made up company name is that no one knows what you do. The upside is that when someone mentions you on the web, its pretty easy to figure it out (not too many cases of someone writing about the wrong “Nuvvo”, I’d imagine).

What's in a name?

At the risk of throwing stones from a glass house, what’s up with the names of next generation web companies? Catching up on some of my TechCrunch reading this morning I was struck by how crazy the company names were. Here are just a few from posts in the last week:

YouTube
Kaboodle
Tinfinger
Fleck
YubNub
Podzinger
Eurekster
Nuvvo

As Charlie Wood points out – say them together and these names sound “like an incantation.”

Now I know that it’s hard to find domain names these days, but wow – these names are really out there. Remember the good old days when company names actually told you something about what they did?

More information = good

Here's a great idea:

David Jackson has started posting transcripts from company conference calls on his web site (he's actually been this for a while, but now has pretty extensive coverage of tech company earnings calls). 

I try to listen to a handful of earnings calls each season, but invariably I get to fewer than I want to, or miss the key moment of a call - even when I'm listening to the replay (which is almost always what I end up doing).  I'd much rather peruse the transcripts. Much easier to consume quickly.  Much easier to search.  Much easier to quote from (if you're into that sort of thing).

Thanks David.  Nice work.

Should you be a good employee?

When I worked at Morgan Stanley there was a running debate among the analysts about whether it was better to be a good analyst or a bad analyst. The theory went that if you were a great analyst you were rewarded with more work (but not much more pay, given how few analysts actually made it to the “outstanding” category at bonus time) and if you were a mediocre or bad analyst you were passed over for projects and had a much much better lifestyle (i.e., you worked 60 hours a week instead of 90 or more). Banks never really fired analysts, so one could pretty easily coast by for the time of their indenture.

My own views on this are pretty clear based on prior posts, but there were a handful of people I worked with who went the other route and were rewarded with a social life.

A recent article in the Times (link here, although there have been plenty of articles in the news in the past months on similar topics) got me thinking about how often companies reward failure – sometimes in obvious ways, in the case of large severance payments for failed execs or big bonus payments for execs to work a company through bankruptcy – the same execs who brought the business into financial crisis in the first place; sometimes less obvious in the case of companies who offer their first wave of lay-offs more severance or longer tails on their benefits than later lay-offs.

One would think that venture-funded firms are generally able to avoid this type of behavior, but you’d be wrong – it happens in all types of companies. I think it sucks and I’m going to be more conscious of this phenomenon. High performance organizations reward individuals who truly contribute and, while treating their employees fairly, don’t let people take advantage of sub-par performance.

Networking 101 Expanded

Josh Kerbel wrote me with a good question to my Networking 101 post  and my follow up post to that one Here's how you do it that I thought I’d post along with my response (with his permission).

Josh Writes:

A while back you wrote a post about networking and you referenced Ben Casnocha as an example of a great network, the type of guy who writes people letters and goes out and meets them.

Being that I depend on networking for most of my deal flow and just to build up a network of contacts, I am always looking to talk with people, new people and old.

So I tried a little experiement, I mailed letters of congratulations (I also included a small gift certificate to starbucks as small congratulations present)to people who people who recently landed big promotions that were announced in the newspaper, CEO and director types, but all corporate suits. Funny enough, I did not get one response. My letters were completely non sales orientated, just hi, congratulations type of thing . . .

So I guess what I am asking is that do you see a difference between the entrepreneurs and the corporate types you know in there attitude to networking? Or am I just a lunatic for going out and trying to start relationships with absolute strangers.

Here’s how I responded:

I think it comes down to context, Josh. The difference in what you are describing and what Ben did is that I knew Ben. He reached out to me in a way that was relevant, direct and responsive to something (in this case my blog). I've e-mailed with Ben a few times and even talked with him on the phone once. Your postcard was marketing (an initial introduction aimed at getting the attention of the recipient by offering them something). Ben's was networking - reaching out in a unique and fun way to a group (he later told me he sent 50 postcards out) that he wanted to stay in touch with but that he had already had some contact with.

Interestingly, I think that your Starbucks gift certificate - while an interesting idea - may have even worked against you. I don't want to overstep my undergrad psychology degree, but my hunch is that the gift was received by some as a sign that you were going to follow up to ask for something (there's a chapter on this phenomenon in Influence: The Psychology of Persuasion by Robert Cianldini - ironically recommended to me by Ben a few months back). I think you may have inadvertently created a situation where people perceived your gift as an entry into something they didn't want because the communication lacked context.

I think you'd be better off looking for real entry points with people you'd like to have in your network. If they blog, its easy - post a thoughtful comment to a few blog posts, send an article that you know they might find interesting, etc. If they don't blog try searching for articles they might have either authored or been quoted in. Look for conference presentations they might have given on the web. Check for organizations they might be involved with other than their work. Now contact them with a thoughtful note that's relevant to them and offers something (a link to an article they might find interesting, etc). I'd also be upfront about what you're looking for. If you leave them to guess about your intentions I fear that most people will assume that you're going to want something down the road.

Does that make sense? I can tell you from my own experience that I'd be much more likely to respond well to a response to a blog post than to a more random attempt to get in touch with me or get my attention (this note as an example - you tracked back a few posts of mine and then wrote me this note. I read your blog so I have plenty of context all of which makes me more likely to respond to you).

Morality and China

Tony Perkins posted a cautionary piece on China yesterday to AlwaysOn entitled "Chinese Youth, Unite! A moral view of China"  In it he argues that we (silicon valley) are being perhaps too quick to look past some of the moral and ethical issues with the Chinese government while we give them what he terms a "gigantic money-fisted hug".

My parents just returned from a two week vacation in China and dad sent around his reaction to Perkins piece with his recent on the ground observations as his perspective.

I'm printing it here, with his permission.

__________________________

I'd like to offer a (limited) bottoms-up view to complement Tony's top-down view. I strongly agree that the economic, political, and ethical issues are strongly intertwined (or will be in the next decade).

I just got back from two weeks of cycling and hiking in China. I didn't tour factories or get any official presentation about economics or politics. I just met a lot of Chinese people in cities and in the countryside, and I wasn't restricted in what I could talk to them about. I have three observations:

1. The expansion of the Chinese middle class is real, but superficial so far.
Yes, there are a lot of cell phones, and I got excellent coverage everywhere (even on the tops of mountains and on a fairly remote section of the Great Wall). New construction is evident in all but the smallest towns. Shops with "western" goods are open in larger cities. But I noticed that the fanciest shops (Gucci, Ferragamo) had no customers and seemed to be there to establish a brand identity (trying to ensure that what's chic in the West stays chic in the East). Most ordinary Chinese have access to very modest consumer goods and live in (at best) very modest housing. I also noticed that a lot of new construction (especially outside of the largest cities) deteriorates very quickly, mostly due to poor materials and building practices. The huge numbers of people involved make this an economically significant trend, but I think it's important to note that for most individual Chinese their actual living conditions would be considered very modest in the West. Their aspirations, on the other hand, are not as limited. TV, Internet, the presence of high-end (empty) stores, advertising, etc. expose Chinese people to living conditions still not available to most of them. I would predict that within the next five years the disconnect between people's economic aspirations and their ability to achieve them within the boundaries of government policies could lead to a political crisis.

2. The impact of this on the environment (and on cultural treasures) is significant and may become a growth-limiting factor.
My advice to those of you who haven't seen the Forbidden City or the Great Wall is: go now. I don't see how these treasures can withstand the huge crush of tourists descending on them. On a typical weekend there might be 20,000 people visiting the Forbidden City. And these aren't foreigners. One interesting consequence of the economic gains in China is that most of the tourists are Chinese -- people who can now afford to go see the cultural and historical sights they have heard about. This all takes place in an environment of increasing pollution and (by our standards) inadequate environmental controls. This is another source of potential political unrest, though harder to predict because other countries have shown that their populations can tolerate considerable environmental (and personal) damage in the context of economic growth.

3. Moral/ethical issues cannot be ignored.
I hear stories about political repression, but I didn't see any evidence of it so I can't comment on it. But I did see one story that was remarkably moving and, unfortunately, common. When we checked in for our flight in Denver we met a couple also on their way to Beijing and learned that they were going to adopt a year-old girl. When we got to Xi'an (400 miles SW of Beijing) we were delighted to see them again in our hotel, the day after they had gotten their new daughter -- along with 14 other couples and their new babies. In all, I probably saw 100 Western couples from the US, Spain, Finland, and France adopting (girl) babies in China. And when we got back to San Francisco we ended up on the same plane to Denver as our new friends and their daughter. So we got to see her meet her new brothers. I have never seen a child happier. No eye was dry among those of us who knew the story. The fact is that if a couple lives in a Chinese city they get to have one child; in the countryside it's two. This is strongly enforced. Many girls babies are abandoned and not reported (so the couple can try again). There are two important consequences of this. First, it is significantly depleting China of girls, which will have implications in the future as Chinese men look to build families (this was a common topic of conversation among Chinese young men). Second, the government practices behind this are strongly at odds with Western ethical values. I do not believe that this can be separated from economic and political issues. (And the fact that much of Western politics is now dominated by religious belief increases the potential conflict here -- but I want to emphasize that I believe this transcends religious belief and is a basic ethical issue for many people inside and outside of China.)

Conclusion: The growing economic power of China is significant, but gains in living standards are spread over so may people that the impact on most individuals is modest. That, coupled with the cultural impact of exposure to Western consumer values and deteriorating environmental conditions, may create conditions that are not conducive to the political continuity so important to the Chinese government. The social and ethical conflicts created by the Chinese government's family policies are significant factors, but their impact is very difficult to predict.

Networking 101

Networking – To interact or engage in informal communication with other for mutual assistance or support (from Dictionary.com)

I talked about networking in my recent post on How to become a venture capitalist. In it I said that I’d put up a separate post with more detailed thoughts on the subject. I don’t pretend to be the final source on the matter, but I do regularly engage in the art of networking – on both the network-ing and network-ed side of the equation. As with all my posts, comments are welcomed (and appreciated). Sorry in advance for the length of this one – I tried cutting it down, but couldn’t get it to work that way . . .

Step 1: Make your list. Good networking starts with knowing who you want to meet – or at least what type of people you want to get in touch with. This can be specific (for example all of the VC’s in town when you are trying to land a VC job) or more general (your peers at other local businesses; CEOs of businesses in a certain industry; all of the patent attorney’s in some market; etc). Either way do some research and make yourself a list of people you want to meet. WRITE IT DOWN. This isn’t a mental list – this is a real list of people you want to get in touch with.

Step 2: Exercise your existing network. You know people. They all know people. There is an entire industry that is trying to take advantage of this on-line. Here’s where you need a second list – write down all of the people that you know (i.e., who would return an e-mail and could vouch for you to someone else) who you think could put you either directly in touch with, or one step closer to the people on your first list. Now contact them in a personal and relevant way and ask for their help. Be specific about what you are asking for (i.e., give them names if possible and plenty of background on why you are asking for help and what you are trying to accomplish). As you get introductions, track where they came from. Your lists should start to merge and you should develop something that looks like a network map showing linkages between the people you know and the people you are trying to meet (the more linkages the better). TRACK INFORMATION. This isn’t a time to rely on your memory. Be anal about writing down who is introducing you to whom, any contextual information you gather and any background you have on the people you are trying to meet with.

Step 3: Be specific & structure your meetings. Most people generally manage some form of Steps 1 and 2 in their networking efforts – even if they are not being as careful as I’d like about documenting their work. Step 3 is where people make what I think is the second most common mistake in networking: when they finally get a meeting with someone they are looking to network with they aren’t specific about what they want. I hate meetings like this. They generally include statements like “I’m not really sure what I’m looking to do,” or “I’ve got a very broad background and could fit in a bunch of different places,” or “What kind of investments does Mobius make,” or my personal favorite: “I’d like to do something more entrepreneurial.” Not helpful. At all. Do your homework on who you are meeting with. Be specific about what you are looking to do. Have a story to tell and make sure it’s relevant to the person you are talking with. If you are asking for help/advice on something open ended make sure that is part of the context of setting up the meeting (its ok to network for the purpose of figuring out what you want to do with your life, but be clear about your intent and be specific about the ways in which the person you are talking with can be helpful). The corollary to being specific is structuring your networking interactions well. Good networkers are adept at guiding networking meetings in a way that drives the results they are looking for. Whether you are talking to someone at a cocktail party or sitting in their office – know how you want the interaction to go and guide the discussion.

Step 4: Take good notes. This is pretty obvious, but I’m amazed at how often I meet with people who don’t write anything down in our meetings. When I’m networking with someone I take careful notes – first, because it shows that I’m interested in and respect what the other person is saying and second because I want to keep a record of what we talked about and specific ideas for follow-up. When its awkward to take notes directly (for instance at a social event), I try to write down information after a conversation has ended – preferably on the back of the business card I just received, but at least on a notepad (which you should always carry along with a pen to any networking event).

Steps 5 & 6: Plan your follow up . . . and actually follow up. These next two steps are where people really fall down – they would make for a lengthy post by themselves. By follow-up I’m not talking about the e-mail you send out the day after meeting with someone thanking them for the meeting, telling them how much you enjoyed talking with them and appreciate their perspective, attaching your CV (or pointing them to your blog <g>), etc. I’m talking about the ongoing communication you have with people. If you’re driving for a specific outcome this can be very structured (i.e., putting reminders in your calendar with specific things you plan to follow up with) – less so if you are engaging in more general networking. Either way, you need to make a plan for how you want to follow up with people and do so. It starts with Step 4 and the natural follow-up to step 4, which is putting this information in some form that is searchable and usable (perhaps a spreadsheet or database if you are networking for a specific outcome, since you’ll be referencing it often, but also potentially notes in your contacts or somewhere else that you store information, but in a way that you can easily separate out people that you are trying to stay in touch with in this way). Remember that networking is a two way street. Good networking is about staying in touch in a relevant way. Sending an e-mail every month asking if any new positions have come open is a bad example of this. Seeing something in the news or an article of interest that you send along to someone with your thoughts is a good example of this. See a person you know in the news – send a note congratulating them on their recent success. Notice that a VC you’ve talked with has just made a new investment – send a note. Find an article that you think would be relevant to that CEO you met with a few months ago – send it along. The idea is to stay top of mind, but in a way that is relevant to the people you are interacting with. Don’t forget to give context in your e-mail (i.e., “Sally – We met two months ago at the xyz event – John Smith introduced us . . . ). I can’t emphasize these steps enough. I can’t believe the number of meetings I have that end with the end of the meeting or a short follow-up note. Even if there were specific follow-up items. People fall down on follow-up and I think expect that they can pop in and out of someone’s network as the need arises. You just accomplished what may be the hardest part of networking (getting a meeting in the first place; grabbing someone’s attention at a party; etc.) – don’t waste your hard work by just entering their contact info in Outlook.

Good networking is definitely an art – and something I’m always trying to get better at myself. I think these suggestions are relevant no matter what stage of the network game you are playing – I hope you find them helpful. Ultimately it’s all about making personal connections and keeping up with those connections in a way that is both relevant to you and to the people in your network.

Follow up to "Thinking in groups"

Writing this reminds me that there really should be a function in TypePad that allows you to simply elevate a comment to a post  . . .

Abhi responded to my post on Thinking in groups with the following comment, which was right on target:

how easy for groups (i.e., boards) to sometimes lean towards a similar interpretations of events" Borrowing liberally from Cialdini's 'Influence' book - Social Proof - In any situation we are apt to behave exactly the same as other people behave (so board members will often look at other board members to decide how to react), and this is even stronger when the other people are similar to us (i'm assuming most board members are quite similar to each other). Ex: If there's a red light but no traffic then one person crossing will usually lead to everyone else crossing. Ex: Comedy shows have canned laughter because that automatically means people laugh 'along with' the fake laughter. Ex: The chance of a wounded person getting help is higher if a single person were to see him than if a bunch of people saw him (as in the latter case these people would ALL see each other for reactions, see no response (as they're all looking to tohers), and thus assume that that the correct behavior was inaction).

Let me expand on this in the context of venture capital, since I didn't get into it in my original post.  I think the pressure around conformity is significantly exacerbated for a non-partner VC .  In a body of equals there's clearly some pressure to go with the flow.  Where the group is not all on equal standing this pressure is intensified.

Clearly a key to being an effective VC is not falling into this trap.  This can be particularly hard for a junior VC and especially if s/he is  the observer rather than the board member (see my post on the difference here).  I've watched this dynamic play out in front of me - where dissenting opinion, particularly of the partner, is absolutely not allowed.  I think this is stupid way for partners to run their business - after all they pay the people around them to have opinions (thankfully Brad heartily agrees and encourages full participation from everyone around the table), but it happens all the time. 

Thinking in groups

In one of my first posts (The Adventure Reference) I talked about what amounts to pattern recognition – the ability to interpret information and draw conclusions based on experience with similar sets of circumstances.

I was thinking about how difficult this can be the other day and, importantly, how easy for groups (i.e., boards) to sometimes lean towards a similar interpretations of events. This reminded me of a classic experiment in psychology that very clearly illustrates this point.

In 1962 psychologists Schachter and Singer 1962 performed an experiment that dealt with what they called the two factor theory of emotion. Basically they were trying to show that people’s interpretation of an emotive state can be easily influenced by environmental factors (in their case another person). In their experiment they injected college students with epinephrine, which is a drug that acts like adrenaline and causes a state of emotional arousal. The students were, of course, told the injection was something else and then placed in a room with someone they thought was also in the study to ‘let the shot take effect’. In actuality their room-mate was working for the experimenters and took on one of several emotional states (anger, excitement, etc). It turns out that the subjects were highly susceptible to taking on the emotional state of the room-mate. They were interpreting their emotional arousal as anger if the room-mate was angry, excitement if the room-mate was excited and so on.

Now, I’m not suggesting that boards are on drugs (or that they should be!), but this experiment illustrates the point that humans are very good at making errors or attribution (somewhat along the same lines as the finger tapping experiment I talked about in my post on communication effectively where people overestimated the extent to which they were conveying useful information).  Something to think about when you are weighing decisions . . . especially in a group.

Make original mistakes

“Make original mistakes.” 

Someone (Brad? Wendy? I can’t remember) said this in a board meeting about a month ago. I wrote it down on a piece of paper and have been carrying it around with me ever since. The concept is right on and meaningful no matter what you do. For me it is a reminder of two important things:

First, we all have mentors and peer groups. As a venture capitalist, for example, I have the partners and principals at my firm; I have partners at other venture firms with whom I have worked with closely; I have the CEO’s and executives at the companies I work with; etc.. These are great resources for me to tap when I’m faced with challenges. Whether you work for a venture backed company, a large organization or a non-profit you there are people you can turn to for advice and counsel.

Second, don’t be afraid to share your challenges with others. It’s only natural to celebrate our successes and dig in and think harder about where we’re coming up short. By all means, share the good news; but also share the not-so-good news and the challenges. Share them with your board, share them with your peers, share them across your executive team. Ask for help. Find people who have faced similar challenges. 

In short, don’t be afraid to make mistakes; just make sure they are original ones.

The days of yore

Credit to Brad for this one – I had completely forgotten about it when he sent it to me (I waited for him to blog it, but he’s been out of town so I thought I’d put it up).   

Remember the wayback machine?

www.waybackmachine.org.

It lets you search for old versions of web sites.

Want to know what Yahoo’s site looked like in October of 1996 – here you go .

How about Netscape that same month (makes you wax nostalgic, doesn’t it?) .

Google beta anyone? 

Miss the Nasdaq at 4,800? Here it is. 

Enjoy!

Taking 100% responsibility one step further

Sandy Hamilton (one of the key execs at Newsgator) did a nice follow-up post to the note I wrote about taking 100% responsibility.  In it he talks about what that actually means  - how we present ourselves and the importance of taking responsibility not just for what you are saying, but also for what other people are hearing. 

What a powerful concept.  Thanks Sandy for taking this to the next level.

In case the link above isn't working, here's the  full URL of his post: http://sandyhamilton.blogs.com/sandy_hamilton/2005/04/did_i_say_that.html

Becoming a verb

You’re on the right track when your company becomes a verb.  Just add a “d” to your name and you’ve got an idea what I’m talking about.  Google is the best example of this – as in “Have you Googled that?”  

A couple of the companies I work with are on their way (at least in the markets they play in). I take it as a good sign that they are becoming important enough with their customers as to actually enter their lexicon (as in “Have you Quova’d this IP address?”).

Communicate! Communicate! Communicate!

I was reminded (again) today of the importance of clear, open and honest communication. There’s no substitute for it.  There seems to be a 1:10 rule about communication such that it takes about 10 times the amount of energy/effort to communicate something after the fact (i.e., after a communication break-down) than doing it up front.  Not to mention the potential hard feelings, bad karma, etc.

With all the ways to get in touch these days (e-mail, phone, cell phone, sms, etc.) it seems like this should be pretty easy.

I’m as guilty as the next guy about forgetting this lesson.  Perhaps writing it down here (and on a sticky on my computer screen) will help remind me. . .

Moving right along

Fred Wilson had a great post recently on the problem of analysis paralysis. I completely agree. One of the challenges of business (and entrepreneurship) is that companies constantly have to make decisions based on incomplete information. That’s just part of the game. Successful entrepreneurs recognize that, take in as much information as makes sense, make a decision and then move on. While it’s helpful to look back at these decisions, I completely agree with Fred’s assertion that it’s not really fair to second guess them (although its important to learn from them). So, how do you avoid the analysis paralysis trap? Here are a couple of thoughts

1. on subjects that you are deeply familiar with, your first or gut instinct is often the best

2. set a finite amount of time to gather information and stick to that time frame

3. the amount of time and energy you spend gathering information on a decisio