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Entrepreneurs: How NOT to Close a Company

Thursday, July 14th, 2016
http://www.usatoday.com/story/money/business/2014/11/17/baverman/18965353/

Move Loot’s co-founders

Last month Zach Ware, managing partner of VTF Capital and founder of Shift, talked about the right and wrong way to close a company.

“There is absolutely no reason for a company to shut down overnight. That’s a result of a selfish set of decisions a founder made.”

Obviously, the founders of Move Loot weren’t listening.

They not only shafted their people,

The mood at the all-hands meeting was tense, and employees asked management to give them the heads up if things were going badly. They were told that the cuts were the move they needed, the person said of the meeting. “Three weeks later is when the hammer dropped on everyone else,” they said.

They shafted their customers

Customers have accused Move Loot on Twitter of taking their money and failing to deliver items. Other sellers remain frustrated that the marketplace closed with no warning, leaving them in a lurch when trying to move out. The phone number that it had given out on Twitter for customer support now has a voicemail saying that phone support is no longer available.

As for their investors, I have no sympathy for them. Who gives four kids, with little-to-none business, let alone operational, experience combined, $22 million dollars with no built in accountability?

Founders owe it to all their stakeholders to be responsible.

If you recall, the three most successful startups in the world, Apple, Google and Facebook, all brought in seasoned management talent in order to give the founders time to gather experience and learn.

Contrary to Silicon Valley’s attitude, running a company takes skill; it isn’t learned from a book, but from experience, as opposed to throwing it at the wall to see what sticks.

Or in Valley lingo, ‘move fast and break things’.

But, as some ex employees point out,

 “At some point you realize how expensive it is if you break things every day. There has to be a little discipline.”

Of course, that would involve not only taking responsibility, but acting responsibly, too.

I heard a great line on a Bones rerun.

There’s a major difference between an entrepreneur and a con artist: an entrepreneur believes in the dreams he’s selling.

But then, so do pathological liars.

Image credit: Move Loot (via USA Today)

Entrepreneurs: Riot Games: Against Prevailing Wisdom

Thursday, October 16th, 2014

https://www.flickr.com/photos/chris-yunker/5689436382

When Riot Games was founded in 2006 by Brandon Beck, and Marc Merrill it was done out of frustration. They wanted a game that would embrace fans desire to engage in that game, rather than being forced to dump it for a new version.

League of Legends was launched three years later; it was launched ignoring prevailing wisdom about how to make a game pay, i.e., no hardware, free download, players couldn’t buy extra power or skill for their avatars and time to grow organically.

“People told us when we started that if you don’t charge up front, or if you’re not selling extra power or stats, it won’t work,” Mr. Merrill said. “But that fails to account for the coolness factor. If you’re really into cars, you don’t mind spending $50,000 to soup up your Honda. That’s the player we’re tapping into.”

Riot now has 1500 employees and is on target to break the billion dollar revenue mark.

The company says there are now 67 million active monthly players around the world, and in August alone this crowd spent $122 million, according to SuperData.

Riot Games doesn’t have advertising on its site; it focuses totally on its users believing that if they are happy revenues will come.

“Whenever I talk to executives at Riot, it’s like a mantra: ‘Revenue is second, the player experience is first,’ ” said Joost van Dreunen, chief executive of SuperData. “The paradox is that by putting revenue second, League will be one of the very few games to bring in $1 billion in 2014.”

Moreover, although it isn’t paying off immediately, Riot Games is working diligently to build LoL into a major e-sports presence.

Dozens of those players are now in Seoul, at the fourth world championship. On Oct. 19, the finals will be held in a stadium built for soccer’s World Cup, with 40,000 fans expected and many times that number watching online. Last year, Riot Games says, 32 million people around the world saw a South Korean team win the Summoner’s Cup, along with a grand prize of $1 million, in the Staples Center in Los Angeles. That’s an audience larger than the one that tuned in to the last game of the N.B.A. finals that year.

And while most of Riot Games’ 1500 employees are in Santa Monica, the bulk of its players are in Asia.

Sometimes it pays not to listen to the experts.

Flickr image credit: Chris Yunker

The Story Behind a Great Interview Question

Wednesday, October 8th, 2014

https://www.flickr.com/photos/warrenski/4300670672

Michael Cascio, a former executive at the National Geographic Channel, A&E and Animal Planet, who now runs M&C Media, has a favorite interview question.

Early on he asks, “What did you do in the summers during college and high school?”

Not a question most candidates are expecting, but one that stems from Cascio’s personal experience.

He worked two summers as a janitor at the Wolf Trap event venue while he was getting his MBA.

You might not expect that would be a defining experience for a “middle-class college kid headed for a white-collar life,” but it was.

Cascio says it was in that job that he learned the basics of a great career and it was his janitorial boss who gave him the best career advice.

The basics:

You have to show up every day, and on time. You have to appreciate everyone who works around you. You should acknowledge — and learn to deal with — the pecking order in the working world. You have to exert yourself in ways you may not have learned in school. And you often have to do things that have nothing — and everything — to do with your career and your life ahead.

The best advice:

“Never turn down a chance to take on more responsibility.”

The point is that it’s not just about what candidates have done, but what they learned from the experience that matters—no matter what it was.

Flickr image credit: warrenski

Harley Davidson: Against the Tide

Sunday, February 2nd, 2014

http://www.flickr.com/photos/gonmi/8719381711/

Harley-Davidson is my hero.

Not because I’m a motorcycle nut, but because they do everything I believe makes a company successful—not to mention all the stuff about which I know nothing.

What I do know is that Harley proves there is more than one way to skin a cat.

They didn’t outsource manufacturing; they didn’t bust their union; they didn’t dump people for robots—in fact, there are no robots on the main assembly line.

They did redesign production to take advantage of the knowledge inherent in line workers with an average tenure of 18 years.

There are around 1,200 different configurations, and a new bike starts its way through the production line every 80 seconds. Virtually each one is unique, and workers have no idea what’s coming 80 seconds later. Surprisingly, robots can’t adjust on the fly like that.

They did spread 150 problem-solvers through the 5-6 man production teams that hand-build each bike.

Every time a new bike came down the line, it took a few extra shoves to push it into place. In fact, it took an extra 1.2 seconds. But Dettinger, who had spent some 20 years at the York plant, knew that every second counted. With 400 motorcycles built each shift, on two shifts a day, an extra 1.2 seconds per bike added up to 2,200 lost bikes annually. Millions could be lost in revenue. Maybe it wasn’t such a small problem.

Each problem-solver has the same core mission: “to monitor his small section of the production line and search for better ways to make motorcycles.”

For decades, management and economists have driven a mantra that to prosper manufacturing in the US meant no unions, low wages and no benefits.

At Harley, costs have fallen by $100 million and the stock is trading around $62 (it was around ten in January 2009).

Most importantly, from a customer’s viewpoint, what used to be an 18 month wait from order to pick-up is now two weeks.

Harley went against the tide and the results are proof that the “experts” aren’t always right.

Flickr image credit: Gonmi

Entrepreneurs: Older is Better

Thursday, February 21st, 2013

http://www.flickr.com/photos/moonlightbulb/4871952762/

Yet another study validates what many of us who work around entrepreneurs believe, i.e., startups aren’t just the province of the young.

That’s right; experience matters.

The best entrepreneurs are ones who work in their field first, gaining valuable real-world knowledge and experience for a decade or more. (We heard exactly the same thing from Google’s startup acquisition guy).

Every year of life improves an entrepreneur’s chances up until 40, but they don’t diminish thereafter.

What else is needed?

You need to be open-minded, flexible, able to pivot in a heartbeat. You need to be agreeable… You don’t need IQ as it is traditionally measured; you do need the ability to recognize patterns.

And only enough ego to avoid being trampled.

Older entrepreneurs have an advantage because they’ve

  • know they are entitled to nothing;
  • failed and lived through it;
  • seen a variety of economies up, down and around;
  • recognize that great ideas come from all types and all levels;
  • can recognize and a**hole from a mile away;
  • won’t sacrifice the culture no matter how good s/he is; and, finally,
  • they know that good or bad this, too, will pass.

Hat tip to EMANIO‘s KG Charles-Harris for sending me the link.

Flickr image credit: Selena N. B. H.

Quotable Quotes: Life

Sunday, October 21st, 2012

http://www.flickr.com/photos/joebehr/4986222129/Last week I shared quotes about living life; today I thought we’d check out commentary starting with what life is.

Sren Aaby Kierkegaard wrapped it up neatly when he said, “Life is not a problem to be solved but a reality to be experienced.”

Alan Bennett’s opinion is more depressing, “Life is generally something that happens elsewhere.”
Andrew Brown suggests that for many people these days ‘elsewhere’ refers to cyberspace, The Internet is so big, so powerful and so pointless that for some people it is a complete substitute for life.”

Pearl Buck has, to my mind, a more upbeat and accurate belief, Life is what happens while you’re busy making other plans.”
For the many people who buy into Bennett’s attitude, while laying the blame elsewhere, I recommend they consider the words of Louis L’Amour, There comes a time when it lies within a man’s grasp to shape the clay of his life into the sort of thing he wishes to be. Only the weak blame parents, the times, lack of good fortune, or quirks of fate.”

Shaping your life usually means change. Change is a choice; a choice that every person makes many times during their life. William James offers three things to do to make it happen. He says, To change your life;
-Start immediately
-Do it flamboyantly
-No exceptions”

Good advice, especially when we remember Winston Churchill’s wise words, “We make a living by what we get, but we make a life by what we give.”
But how do we know if we’re doing it correctly? We don’t; we can only do our best. As Goethe tells us, Life can only be understood backwards, but must be lived forwards.”

If you do look backwards know that you will find many things that in hindsight would be better done differently or not at all, but rather than wasting time on regrets consider Tallulah Bankhead’s attitude, “If I had my life to live over again, I’d make the same mistakes, only sooner.”
I’ll leave you to day with this thought and a ling to my favorite Rule.

Diane Ackerman said, “I don’t want to get to the end of my life and find that I have just lived the length of it. I want to have lived the width of it as well.”

I vehemently agree and expounded on that in the very first Rule I posted way back in 2006.

Flickr image credit: Joe Wolf

Ducks in a Row: Culture I/O

Tuesday, April 17th, 2012

Culture is today’s focus; it is considered the reason that companies succeed or fail and whether innovation will flourish or wither.

Culture is researched, dissected, written about and discussed; is culture a set of specific rules or a moving target, amorphous and difficult to pin down?

Perhaps it’s more like a computer, with core hardware and constantly changing software.

In computing, the term I/O refers to input, whatever is received by the system, and output, that which results when the input if processed.

Programmers know that if the input if bad what comes out of the computer won’t be any better, a phenomenon known as “garbage in/garbage out.”

GI/GO applies to culture and, for that matter, everything else in life.

29171423_7be4bac0d3_mWhat comes out is a function of what you put in.

Blindly accepting everything offered by even the most brilliant source will result in garbage out at some point.

Creating and sustaining good culture requires more than studying what’s worked elsewhere and best practice benchmarks; it requires critical thinking on your part.

No one person, past, present or future, has all the answers. No company has tried every possible combination of every approach conceivable.

Plus, they are not you, while your culture is you.

That means being your own computer—gathering input from all available sources, applying it to your situation, processing it—absorbing, reworking and rejecting.

The result will be at least slightly different from what you started with, because you’ve added the flavor of your own life experiences, knowledge and MAP to the mix—and that’s good, it shouldn’t be an exact copy.

Flickr image credit: John D

Quotable Quotes: Pithyisms

Sunday, January 22nd, 2012

It is always useful to have a pithy way to get a point across, but how many of us can think that fast? So in the interest of making my readers sound both brilliant and cool here are four “pithyisms” to use at your discretion—with attribution, one would hope.

Oscar Wilde said, “Experience is simply the name we give our mistakes.” Try that on your boss the next time you turn left when he says go right.

Have you wondered why VCs and pundits of all stripes keep telling entrepreneurs and managers that attitude is more important than skills? Ralph Marston has the answer, “Excellence is not a skill. It is an attitude.”

It is said that once the genie is out of the bottle he can not be put back; this is especially true of personal growth, or, as Oliver Wendell Holmes, Jr. said, “A mind that is stretched by a new experience can never go back to its old dimensions.”

Personal growth is a wonderful thing, but it does require taking risks. However, risks can be mitigated, even when following Mark Twain’s recommendation, “A man who carries a cat by the tail learns something he can learn in no other way.”

And remember, it’s always a good idea to

Flickr image credit: quinn.anya

Quotable Quotes: Experience

Sunday, August 14th, 2011

1621176776_34992749c9_mThe wonderful thing about being young is you have the whole world in which to explore and learn.

The terrible thing about being young is you have the whole world in which to explore and learn.

Albert Einstein said, “The only source of knowledge is experience,” but kids know everything (just ask them) without experiencing anything.

The problem with that attitude is best expressed by Bob Packwood when he said, “Good judgment comes from experience. Experience comes from bad judgment.”

And common wisdom adds a corollary that drives the point home, “Trouble brings experience, and experience brings wisdom.”

No matter how smart, even if as successful as Mark Zukerberg, kids would do well to remember the words of Gordon Segal, founder of Crate and Barrel, “No matter how successful you are, stay humble, stay nervous, and don’t believe your own press.”

Or, as Robert Burns put it more than 200 years ago, “O would some power the giftie gie us to see ourselves as others see us.”

Finally, Lily Tomlin provides a mantra for kids and adults to live by, “The road to success is always under construction”

Have a wonderful day!

Image credit: Reinout van Rees

If the Shoe Fits: Bad Judgment VS Inexperience

Friday, June 24th, 2011

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

3829103264_9cb64b9c62_mDon’t mix inexperience with bad judgment.

It’s okay to be a first time entrepreneur or company advisor.  You know the domain, you know the market, and you know your customers.

You’re there as an entrepreneur to invent the company and drive it to success or as an advisor or board member to help the team succeed.

But growing a business from small to large, with all of the nuances of growing the team, financing and operations is another matter.  It’s hard work and there are known pot-holes.  It’s just hard to see them while running at 120 MPH.

Sometimes first-time startup folks cut the wrong corners.

In the process of having urgency, working with very little (if any) cash, and wishing to keep the “attention” of startup colleagues, sometimes those stinky “admin” details like stock plans get left for later “when we get our first real investment.”  Read: “when my investor or lawyer says I have to do it.”

“Lean” startup is a great mantra, but some “process” and steps are needed to ensure that the company and the team are headed for success.  And here’s why stock is so important.

Good judgment says “use stock to get the best people.”  This is tempting when cash is tight (or non-existent) and for good reason.  This is a great instinct and is fully aligned with the start-up entrepreneur’s mindset of “stock is important” and “my company is valuable, and will be even more valuable in the future.”  You want to enroll early employees in this story.

Using gut instinct, ad-hoc grants and haphazard allocations however, is not a good idea, and can sabotage a team’s ability to grow and survive rough times.  And for all those first-time entrepreneurs—there will be rough times.

Belief in the mutual commitment of team members, and belief that the company will survive and thrive after those tough times (even perhaps leading to the epiphany and “pivot”) is what holds a team together.

Inexperience is normal and can be managed through passion, being coachable, and by building a great team.

Bad judgment cannot.  Stock is not some abstract thing that can be picked from a tree, used as needed, and re-grown.  It is precious and has both positive and negative impact on workers.  It is the most common source of “drama” in the founding team.  There’s enough drama in a startup.

It is just plain bad judgment to avoid putting a coherent and thoughtful stock option allocation process into place at the beginning.  No entrepreneur would put-off creating a budget and cash-flow management plan.  It’s just as important.

Having a clear plan and system ensures that both the early co-founders and all key team members that follow them (from office assistant to big-hitter sales pro) understand and buy-into the company’s philosophy and process around fair stock allocation.

A good allocation plan and philosophy eliminates drama, is unemotional, transparent and authentic. There will be no whining, and no hurt feelings.  When things get tough, there will be no resentments about who has more stock.  The result is that there will be a better chance of survival through the predictable (an unpredictable) storms.  Sure, there may still be some drama, but it will be more manageable.

In thinking about what is needed and what is not needed in your “Lean Startup” think about the difference between inexperience and judgment.  Passion ignites the rest.  Don’t let bad judgment sink the ship.

Good Judgment = essential.

Direct Experience = helpful but not essential.

Passion = essential.

Fair and transparent stock allocation process = priceless.

Option Sanity™ counteracts naiveté

Come visit Option Sanity for an easy-to-understand, simple-to-implement stock process.  It’s so easy a CEO can do it.

Warning.
Do not attempt to use Option Sanity™ without a strong commitment to business planning, financial controls, honesty, ethics, and “doing the right thing.” Use only as directed.
Users of Option Sanity may experience sudden increases in team cohesion and worker satisfaction. In cases where team productivity, retention and company success is greater than typical, expect media interest and invitations as keynote speaker.

Flickr image credit: Kevin Spencer

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