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Memorial Day — a Time for the Living, Too

May 25th, 2015 by Miki Saxon


Memorial Day is a time when people across the country remember those who have died, especially those who died in service to their country.

While remembering them is important, it’s just as, if not more so, to remember those who served and lived, since many came home wounded — whether physically or mentally.

So this Memorial Day take time to remember and honor the living with a donation to Wounded Warriors or another veterans program if you prefer.

And I hope you don’t limit your thanks, donations or volunteering to today.

All of us need to step up and care, since our government isn’t doing that great a job.

Image credit: Wounded Warrior Project

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Entrepreneur: TiECon with Ajo Fod

May 22nd, 2015 by Ajo Fod

Ajo Fod

TiEcon has become a huge event for entrepreneurs all over the world. It helps educate the entrepreneurs and connect them to clients, mentors and capital.
They have many good programs for entrepreneurs like Mentor Connect, where people meet potential Mentors who are people with a lot of experience starting companies. They also have a Founder Connect program where people speak of their ideas and look for either founders or capital.
I met people and reporters from Australia, Japan, Nigeria and Brazil, apart from the usual countries. This has become a global event, because TiE serves a big need.
Saying “TiE is for South Asians” (Indians/Pakistanis) is like saying “the US is for Europeans”. The successes TiE and the US have accomplished require being open and inclusive.

Just like the underlying value of the US is the preservation of freedoms, TiE’s value is to nurture entrepreneurs and grow its community.

TiE’s organizers realize the value of being well connected to achieve its goals. They have succeeded in attracting large volumes of the right kind of attention.

At Mentor Connect, I met Seshan Rammohan and Siren Dutia, both veterans of the field. Typically Mentor Connect puts a single mentor with 5 founders looking for advice. Fortunately I got two mentors’ time and minds for the price of one.

The discussion was interesting because we heard about the problems that different founders face. The advice was very useful.

I went to a few talks, but I’ll cover three to keep it short.


One superstar at TiEcon was Steve Blank, who originated the methodology that launched the Lean Startup movement as described in Eric Ries’ “The Lean Startup.” The core message is to start small, get out and talk to your market and build what customers actually need and want.

Startups are not small versions of large companies. They are in search of business models that work. Large business on the other hand execute strategies.

Steve mentioned a book with pictures called “Business Model Generation” for people who want to build a startup. I’m curious.

In a startup you build things that get you the maximum learning. Before you fire execs, it is a good idea to fire the plan and try another.

Startups are under a lot of pressure. They think in terms of their burn rate and their runway.

Startups should ideally plan on discovering a businesses that works. An exit should be the last thing on their mind.
The reasons people acquire a startup are:

  • An existing product, e.g., whatsapp
  • P&L and good cash flow.
  • Technology: Oclulus
  • Acquahire — when they want the developers, but for something different.

Startups have a different culture. Assimilation into an existing business can wash out the productivity because the processes in place for execution are different from innovation, i.e., Key Performance Indicators (KPIs)


A panel discussion: How not to mess up the cap table

The cap table is the definition of who owns the company and their rights. It typically defines the stock holders, the debt holders and the liquidation preferences (who gets cash before whom).

A VC mentioned an interesting incident where he killed a company by asking who owned it. The founders got into a fight and decided not to form the company!

It is also a good idea to have a vesting schedule so that one of the founders doesn’t “… go to Brazil with his wife with his share of the company while the others work for their equity.”

20% of allocation of stock is usually based on role of people in past; the rest is about future.

Standard vesting for employees is 4 years.

Investors get preferred stock, because they want to get their money back first. This is changing with Y-Combinator’s SAFE and Founder Institute’s Convertible Equity ideas. Another reason to be careful is that option pricing would be set by investors if they take preferred.

The things to worry about in a funding round are:

Valuation: No one forgets this. Clearly, the higher the better.

Control: Who controls the board seats and voting rights. This is tricky because rights and seniority affect the way people think.

Rights: What special right do investors get, such as a board seat.

Seniority: Who gets their money first.

Founder rights: How can founders be removed from power? Typical statement is a felony., but you could ask for “willful and persistent gross negligence.” It is also important to negotiate severance as a part of this deal.

There is a difference between preferred and non-preferred stock. Preferred allows double dipping. Investors get their money back and then some more of the stock.

Usually investors own 25% after first round.

The difference between negotiation and begging is leverage. Get a few investors to land at the same time and you are in a much better negotiating spot.

An important decision is to file the 83b election within 30 days of getting equity. The founder will be required to pay taxes on the portion of equity that vests if this is not filed. This likely involves a cash flow mismatch because the founder may not have liquid cash when the equity vests. 

For more information read Founder’s Workbench 83 (b) Election

Other common mistakes startups make include:

… not having a clear focus.

… compensating people and getting clear ownership of code written for the company.

There are two options: the pain of disappointment or the pain of discipline.



The best time to plan to exit is as early as possible.

Early thought can include, Are there going to be a lot of companies that will be interested. Is it a good IPO idea?

Ashmeet Sidana says there are two exit scenarios.

… Approached for an exit.

… Or things don’t work out.
A banker or a business relationship usually leads to an intro for these.

Lots of teams are typically involved in exits. The deal team will work on the deal. CPAs, lawyers and wealth managers are usually involved.

Then there is the question of what happens to the cash. Typically people use trusts to allow continued investment and avoid a steep tax. This also allows for a tax shelter for money designated for charity.

Exits are most intense periods. Cases where board meetings happen every 3 hours are common.

Think also of what to do next after the vacation at the end of the deal.

Where does the money get wired?
At the time the M&A term sheet is signed the probability of acquisition is 40%.
In contrast the probability of funding is 80% in VC rounds.

Time can kill deals in M&A. However clarity is important as well. A CEO once took time to work out every detail and the final deal was very close to the term sheet.

Ask what is the reason people are acquiring the company? Alignment is important. Avoid conflicts of interest at this critical time. Try to create a separation from noise in the markets.

Founders should negotiate to get some liquidity early to pay for costs.

Image credit: Alpha Sangha

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Before You Tweet…

May 20th, 2015 by Miki Saxon


You know that old saying, ‘do not run mouth unless brain is engaged’?

These days there should be a rule about not posting to social media unless brain is engaged.

Better yet, some kind of hardware similar to the gadget that prevents a car from starting if the driver can’t pass a breathalyzer test.

Media is full of stories about people who were fired for what they tweeted.

The rationalization I hear from various people is that it won’t happen to them because “I’m different.” They say that “they (those fired) were nobodies, i.e., low-level workers or unemployed, while they are “professionals,” i.e., they have clout.

Once I stop laughing I remind them of all those with clout who sent stupid tweet that cost them their jobs.

Now I just send them a link listing 13 Twitter-savvy somebodys fired for their tweets.

Whether you’re a somebody or a nobody, read the list.

Then be sure your brain is engaged before you post a tweet — every time.

Flickr image credit: Bernard Goldbach

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Ducks in a Row: the True Source of Happiness

May 19th, 2015 by Miki Saxon


It’s been proven that the happier the workers the higher the productivity and creativeness.

So what really makes people happy?

Lawyers provide a good example, in spite of all the jokes.

Researchers who surveyed 6,200 lawyers about their jobs and health found that the factors most frequently associated with success in the legal field, such as high income or a partner-track job at a prestigious firm, had almost zero correlation with happiness and well-being. However, lawyers in public-service jobs who made the least money, like public defenders or Legal Aid attorneys, were most likely to report being happy.

I wrote What People Want one week short of nine years ago and after rereading it see no reason to update it.

As research continually proves, the basic human operating system doesn’t really change.

Flickr image credit: tico_24

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A Different Kind of Diversity

May 18th, 2015 by Miki Saxon


I’ve had a lot of inquiries lately from managers who believe their teams have lost their edge.

Productivity is fine and they innovate, but in a predictable, prosaic way.

All were facing the same problem, but none could see that the source was themselves.

It is the same problem many bosses face, including Dan, whom I wrote about seven years ago.

So rather than spend my time and their money identifying the likely cause I sent each one this link and told them to call if they needed additional help.

So far I haven’t heard from any of them.

Flickr image credit: Denise Krebs

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If the Shoe Fits: Shooting From the Hip

May 15th, 2015 by Miki Saxon

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mOne of the hardest things that founders/startups face is the need to grow up and stop shooting from the hip.

I hear the reasons not to all the time

  • It will ruin our culture.
  • It stifles creativity.
  • It’s for larger companies.
  • It’s bureaucratic.
  • It’s too time consuming.

“It” refers to the underpinnings of all successful companies. “It” includes the following, or variations thereof, in order of importance:

  • Financial controls that include, but are not limited to
    • monthly statements of revenues by product;
    • discounts;
    • costs by department;
    • cost of customer acquisition;
    • stock issuance;
    • cash flow;
    • hiring by department
  • Hiring process
  • Annual operating plan covering the above financial measures
  • Organization charts and definitions of responsibilities
  • Long-term planning
  • Centralized information technology implementation and planning

Whether it’s just you, or one, ten, fifty, or more employees, whether full time, part time or virtual, you need viable processes to keep you focused—think of it as coloring inside the lines.

Everything on this list can, and should, be tailored to your business model, but financial controls of one sort or another and a good hiring process are necessary to any business.

Sure, they can’t all be implemented at once, but none of them will happen as long as your MAP rejects or begrudges them—after all, you’re the founder and people will follow your lead.

Finally, don’t confuse process with bureaucracy.

Process is like MAP, it gets you where you want to go, whereas bureaucracy stifles whatever it touches.

Process, like MAP, is ever-growing, while bureaucracy is carved in stone.

Image credit: HikingArtist

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Entrepreneurs: Lessons From Founder Showcase

May 14th, 2015 by Ajo Fod

Ajo Fod

Today I attended The Founder Showcase.

There are a tremendous number of companies looking for access in the space of early ventures. It is hard to compete against all the din.

This year’s Founder Showcase included a few dozen interesting companies at the booths. So it is not strange how even a very sophisticated and advanced companies can get overlooked.

So, what do venture capitalists look for?

Each level of the selection process for a startup is brutal in its selectivity and uses a different filter. The filter applied at the Founder Showcase was one of popularity. This induces biases that businesses and investors wouldn’t have.

One  start-up, Quarrio, was the only company using AI to solve a hard problem – one of making data in tables accessible using plain English. It is a usable and complete product relative to others at the showcase. It was filtered out of the pitch competition.

The pitch competition included a selected few companies:

  • Makerblok: Making educational electronics for children.
  • Ampl: A bag that can charge all your devices so that you don’t have to worry about charging each device. Is cool but is too heavy.
  • Theo: MLS quality data (much more accurate in price compared to Redfin). Also there is an argument that there are many features/amenities that Real Estate agents desire.
  • keepe: This is a startup based in Seattle offering handyman services guaranteed in 1 hour.
  • Trato: This company serves up customizable legal documents to make it easier for the masses to do business.

The members of the VC panel are listed here.

On the Problem: VCs generally want to know how much pain is there in the problem. Who faces the pain and how much the solution removes the pain. How big the market is. 

Solution: They need to know how the startup solves the problem. How credible the solution is. If there is a technical moat around the solution. Sometimes the moat is market share. If so the biggest advantage is swift execution.

Scaleability: Building connections one at a time is hard. There has to be a plan to reach people quickly. There is a lot of noise around. There should be a plan to get the business past the noise.

Capital intensity: The question here is how much money needs to be invested in the solution before it starts cash flowing. High capital requirements increase the risk.

Team: Investors look for teams when investing. Teams increase stability and credibility. A team with a background in their field of expertise is more likely to create a moat of competence. Similarly a team that has worked together for a long time is likely to work well.

Generosity: Kickstarter is another example of a generous startup that has succeeded by making many other people succeed.

A life-sciences called Suntowater was voted the best in this Founder Showcase event overwhelmingly by both the crowd and the judges. It solves the problem of clean drinking water from the humidity in the air using electricity generated by a solar panel. This innovation is considered generous because it is most useful to the underdeveloped world.

The general recipe for a successful startup is to relate to people, then promise a great future and connect the dots.

Chamath Palihapitiya, Founder of The Social+Capital Partnership, had great insights to share about the makeup of a wildly successful startup in the future. One source of information is the trend in the tastemaker in society.

In an earlier era individuals and companies paid a lot to get attention from consumers through selection by the tastemaker: companies such as AOL who rented their landing page for millions or radio stations that chose the music to be played.

Now the mechanism of taste selection has become “likes” on Facebook where everyone has a say. The downside of this mechanism is the noise. Facebook is likely to face creative destruction as the pendulum swings.

Chamath thinks that the next generation of companies will have multiple lightly curated channels either selected by humans or by algorithms. An example is Patrion, where people support the art they like, similar to Italy during the Renaissance.

Fixing education is an interesting problem. Linda frames education as a way of learning skills. This is more enlightened than the idea of education for its own sake. Startups that solve a problem can expect better reception.

In the past software giants like Microsoft and Oracle were dominant.

There has been a shift towards SaaS.

The next shift is expected to be towards outcomes as a service such as Uber.

For the investors, Warren Buffets letter to shareholders says that he sat on money for over 1/3rd of the time.

Chamath expects a funding hiccup in 2-3 years. Many companies are raising a lot of money in the current bubble. The easy money has to end at some point. 

Companies that don’t have a sufficiently good product to market fit will suffer. But it’s mostly their employees who have given up pay to get stock options who will lose big.

Chamath’s advice to entrepreneurs is to raise money when the going is good and sit on it till the company figures out a good product to market fit.

Did you know that Peter Diamandis didn’t have 10M$ when he announced the 10M$ prize? Nobody asked about the money since he cleared the line of credibility. He had astronauts and the NASA chairman beside him when he made the announcement. Strangely, the winning team spent about 30M$ to earn the prize.

So, where did the money come from?

Peter approached about 150 people who declined to fund the prize. That is a lot of rejection!

Richard Branson declined to fund twice. After a lot of insecure moments, they found that there is insurance against unlikely events that could cover this event.

A private company going to space was considered unlikely, so he was offered a $3M premium to insure against the outcome. He negotiated it down to a 50k/month premium. Then it was a question of finding people who would support the bet on a monthly basis.  This spreads the pain out, but it lasted for ever.

Richard Branson marched in weeks before the prize was won with an offer of $250m to commercialize the winning tech so that he could have his picture taken with the winners.

… and that is how Venture Capital works.

Image credit: Alpha Sangha

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Where Collaboration Pays (and Doesn’t)

May 13th, 2015 by Miki Saxon


It’s impressive when a market set to double from roughly $4+ billion to $8+ billion by 2019 doesn’t really solve the problem it claims to solve.


The market is collaboration software and, based on new research, it only works for half the problem.

Unfortunately, it turns out that inducing more collaboration may hinder the most important part of problem-solving: actually solving the problem. While connecting employees does increase the ability to gather facts during the early stages of tackling a problem, it also inhibits the ability to analyze those facts and find a solution.

The 21st Century approach that’s been pushed by academics and the collaboration industry has been supported only by research done separately on the two halves.

Solving any problem requires two distinct steps,

  1. Collecting data
  2. Analyzing and using the data.

The first responds well to collaboration; a variety of people with different experiences and world-views are less likely to homogenize their information-gathering.

… the most-clustered groups gathered 5 percent more information than the least-clustered groups…

However, the gain didn’t carry over to a solution.

Clustering also seemed to inhibit the breadth and number of answers that the players proposed. The least-connected networks came up with 17.5 percent more theories and solutions than did the most-connected networks.

17.5% is a significant number — especially when it’s your organization.

Collaboration is a marvelous tool, but it’s not a silver bullet.

As with most good tools it needs to be used where and when it works.

Flickr image credit: Ron Mader

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Ducks in a Row: Which Culture?

May 12th, 2015 by Miki Saxon


Last Thursday we looked at the importance of using your culture as a screening tool to be sure the people hired are, at the least, synergistic with it.

Note that being culturally synergistic has nothing to do with either age or gender.

Friday warned against confusing perks with culture.

But with culture, what you see may not be what you get.

More important than the company’s overall culture is the culture that develops under any given manager, based on individual MAP, and the individual’s management approach.

To ensure a successful hire the culture and management style described must actually exist as opposed to an idealized or misleading version created for interviews.

Strange as it sounds, managers often describe their style more as it ought to be, i.e., what they think it is or what they think the candidate wants to hear.

Obviously, managers aren’t about to tell candidates that they micromanage or don’t believe in helping their people grow, because they might leave.

But today’s workforce is the savviest in history.

Mix that savvy with the uncontrolled and unfiltered information provided by social media and you have a situation that demands authenticity and honesty.

At the least, it requires sins of omission.

Lies, AKA, sins of commission, such as describing the opposite — a boss who encourages growth, provides complete information, then gets out of the way, etc. — as reality pretty much guarantees a turned-down offer or fast turnover — in other words, an unsuccessful hire.

And in case you’ve forgotten exactly what a successful hire is, it’s hiring the right person into the right position at the right time and for the right reasons.

Flickr image credit: Susanne Nilsson

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If the Shoe Fits: How to Lose Talent

May 8th, 2015 by Miki Saxon

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mBack in the early 1980s when there were no cellphones, no email, no WWW and Apple was the hot young company with the great perks a friend of mine interviewed with them.

She was a very talented programmer and Apple wanted her badly.

When I asked her how it went she said it was the dumbest interview she had ever had.

All the manager talked about was how “cool it was to work there” and “the great perks, like the group’s own foosball table” and how much money she would make her and on and on about the stock.

While all that was true, what the manager didn’t spend much time on was the work itself, what she would do, what she could learn, what value she brought and what her career path might look like.

In other words, she was looking for substance and the manager spent almost the entire interview on fluff.

She said he was very surprised when she turned down the offer.

I know it wasn’t that she was female, because I knew many guys who had similar interviews.

And it wasn’t just that manager.

It happened over and over because the perks and stock were constantly spotlighted in the media, like Google and Facebook today, although Apple is the granddaddy of cool perks culture, and the people who worked there couldn’t believe anyone would turn down a chance to join.

The lesson here is that focusing an interview on what the media (real and social) finds noteworthy is not necessarily what attracts people and may cost you real talent.

Image credit: HikingArtist

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