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Archive for May, 2015

If the Shoe Fits: Bias Will Cost You Talent

Friday, May 29th, 2015

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

5726760809_bf0bf0f558_mFollowing-up on yesterday’s post about the “attractiveness bias” I thought I’d share two other posts that will, hopefully, open your eyes and raise your awareness.

Awareness, as Google says, is the only way to fight any bias.

Many times in talking about attractiveness bias people assume that at least women are supportive of women — dream on.

And if looks weren’t bad enough, even the pitch of your voice affects the outcome of what you do — and I doubt that pitching is immune.

So before all these anthropological biases cost you talent try heightening your awareness to avoid these truly stupid, meaningless pitfalls.

Image credit: HikingArtist

Entrepreneurs: Attractiveness Bias

Thursday, May 28th, 2015

This isn’t the first time we’ve delved into the “attractiveness bias”.

Whether you’re looking for a mate, a job, or funding, you will succeed faster if you are “attractive.”

Note this applies to males; attractive females get hit on.

However, the bias can be overcome.

The previous research was from Harvard, while this is from Wharton.

Harvard’s was text, while Wharton’s is a video.

Doesn’t change the findings.

YouTube credit: Knowledge @ Wharton

Miki’s Rules to Live by: Just Because…

Wednesday, May 27th, 2015

https://www.flickr.com/photos/celestinechua/9686779390/

It happens to all of us.

Family, friends, colleges.

They let us down and we have no idea why.

To protect yourself from the disappointment keep this rhyme in mind.

Just because they could

Just because they should

Doesn’t mean they would.

Flickr image credit: Celestine Chua

KG @ The Data Alchemy Conference

Tuesday, May 26th, 2015

kg_charles-harris

The Data Alchemy Conference that I recently attended was well worth going to. In contrast with a lot of these types of conferences, it was an interesting view of how to use predictive and other technologies to improve business outcomes, i.e. not the more common type of technology or data scientist oriented conference here in Silicon Valley.

One of the factors that was attractive was the way that vendors used case studies and best practices to elucidate some of the advantages and complexities of big data and analytics. People from companies such as PayPal, IBM, HP, SAP, Silicon Valley Data Science and others were speakers. There were also lots of industry practitioners in the audience.

The emergence of predictive analytics as a core tool in planning and monitoring in organizations is a relatively recent phenomenon, being less than 10 years old. Now, companies like SAS have been around for a long time, but it is only when IBM acquired SPSS in 2009 and applied their significant marketing engine behind predictive analytics that this market started to take off. 

Of course, it had been used with regards to risk analytics in insurance, churn analysis in telecoms companies and credit worthiness analysis in FICO scores, etc.

Since then we’re seeing predictive analytics being incorporated in many different areas in enterprises based on the growing amount of data and the increasing need to make decisions based on data.

This comes partly from increasing complexity in the business world, greater binary behavior (1 major company in each market that is 10x larger than #2), speed of growth and decline of companies, and decreased cycle times.

One of the most interesting talks was by Jenny Dearborn, Chief Learning Officer at  SAP, who spoke of the way they’re using predictive analytics with regards to employee turnover and onboarding. By using big data analytics on structured and unstructured data, it is possible to understand employee sentiment, training needs and likelihood of staying at the company.

A major challenge to analytics is data quality, what in common vernacular is termed bad or dirty data. Theresa Kushner, VP Enterprise Information Management at VM Ware mentioned that 1/3 of her staff were focused on data quality and cleansing.

It seems as if data quality is an even more important issue than being able to apply advanced algorithms to the data, and that by just ensuring that data is clean we can make better decisions that reduces the need for advanced algorithms in many situations.

In short, it was interesting to see how analytics is being advanced within organizations and getting a practical view of what challenges are faced from a business perspective.

Memorial Day — a Time for the Living, Too

Monday, May 25th, 2015

Wounded_Warrior_Project_logo.svg

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

Entrepreneur: TiECon with Ajo Fod

Friday, May 22nd, 2015

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.

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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)

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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.

~~~~~~~~~~~~~~~~~~~~~~~~~

EXITS

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

Before You Tweet…

Wednesday, May 20th, 2015

https://www.flickr.com/photos/topgold/3341034811/in/photolist-66eFft-oeFjnx-estP63-98Spsn-ru5yJv-free6U-7gCYKZ-dUtnoh-87FzcL-6bGRnQ-8UftWG-5ZTi6A-cHM9aY-7HyzfJ-69pMgP-8BmjRj-hqybdq-8vAtRc-62KiZQ-836Ttv-77r3c2-7graYC-6PeUJ5-7Tteqf-pxBYFB-mqJuuw-6nLBhu-57iHze-8WhEXp-6cfUZr-8hLZzr-6eTk17-btdg1c-9kttrt-61gnsk-5HoFdL-eePN4H-5UuWwg-agYDbQ-6rdmKH-cNL2w5-8MX6kS-c5CURy-8hVWKZ-5QqSYP-91471X-9pT4Ni-jLKyc6-5Fgqh1-6PaSaT

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

Ducks in a Row: the True Source of Happiness

Tuesday, May 19th, 2015

https://www.flickr.com/photos/tico24/50459406/in/photolist-5sBPL-bkrFTn-5fN9HR-cqv8F-5wzJ1f-5wvpDz-7akhzi-5wzJ9s-8bUK32-6B39pQ-bPCwjF-knctJn-4FMm9r-FJK7i-oPVLSb-9EADLW-8P2Cay-edzmtp-7vFaT7-c7KcF1-edF2Ty-edF2Zq-4aT4WK-65WvUX-7kNcQE-exwVN-8RrQYH-7roNWJ-2L3da-pZpoJ8-4UAHBd-5KRj4X-edF3Fh-dpbyL5-bXbL51-65WvX8-7atcFQ-rmeqo-ehm9UX-e2Yvkc-f6DVD-rykAwn-5ZWobq-8dJ4o8-fbkejU-2vhvHS-9BsWWz-b5eaHM-6eqP4V-5MQKUq

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

A Different Kind of Diversity

Monday, May 18th, 2015

https://www.flickr.com/photos/mrsdkrebs/7149966049/

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

If the Shoe Fits: Shooting From the Hip

Friday, May 15th, 2015

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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