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Entrepreneurs: Attractiveness Bias

May 28th, 2015 by Miki Saxon

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

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Miki’s Rules to Live by: Just Because…

May 27th, 2015 by Miki Saxon


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

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KG @ The Data Alchemy Conference

May 26th, 2015 by 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.

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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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