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

I’ve been working with startups since the 1980s; long before many of the current crop of entrepreneurs were born.

Back then, startups were focused on raising enough.

Enough was the minimal amount needed to develop their product start selling it — with the tightly focused goal of building a viable, sustainable business with strong financials and profit.

An old fashioned idea in an era where founders are lauded for their fund-raising skills and their companies are valued accordingly.

However, the idea of enough is gaining supporters.

The most recent is Sachin Kamdar, CEO of Parse.ly.

Kamdar needed to raise $5 million and couldn’t, in spite of strong financials and substantial growth.

Why?

They didn’t want enough money.

While they wanted 5 million, the VCs said they weren’t thinking big enough and offered 25 million and, eventually, 40 million.

What’s really going on here?

As has been noted by many entrepreneurs, and even some investors, VCs don’t offer what’s best for your company.

They offer what is best for their company.

Because they are awash with money, then need to deploy it. They’re limited by how many companies they can work with, so their preference is to make larger investments in fewer companies.

From studying the data, this much is clear: VCs are cash-rich right now, and it’s affecting startups. It pushes companies to raise more money than they actually need. Their viewpoint is, if VCs focus on writing bigger check sizes to companies that have a conceivable path to $100M in annual revenue, then they can put their capital to work “efficiently”. But that efficiency is self-defeating: writing bigger check sizes doesn’t, in itself, put that capital efficiently to work. It might, instead, breed company inefficiency.

VCs also don’t really care who succeeds; they only need one or two 10X successes for their fund to succeed.

In the end, Kamdar turned to his board for advice and found the solution, instead.

Our existing investors knew our business better than anyone. They understood how we were able to scale revenue and product on a lean budget. While they’d seen other SaaS companies come and go since our 2013 Series A, Parse.ly maintained rapid growth. And as it turned out, not only was there enough money to meet $5M in financing, most all of our past investors wanted to double-down. As a result, we ended up raising $6.8M.

A good outcome for Parse.ly and the data they uncovered means a better one for you.

Image credit: HikingArtist

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

Amongst all today’s hype about unicorns Andrew Wilkinson stands out as a beacon of light and a voice of sanity for many entrepreneurs.

Wilkinson is founder/CEO of two successful companies, Flow and MetaLab.

He launched Flow in 2011 and has been growing ever since sans outside investment.

Although he has had talks with angels and VCs over the years he has no interest in taking money and has been publicly vocal on the subject.

He talks about being a horse, instead of a unicorn.

Meanwhile, there are thousands of internet businesses out there, quietly making tens, and even hundreds of millions of dollars, who have taken the same path as In-N-Out. They don’t need to be first, second, or even tenth, in their space, and have instead chosen to focus on a small percent of a massive market. They answer to customers, not investors, and focus on making their employees, customers, and themselves happy.

While In-N-Out is Wilkinson’s model, you can look to privately held SAS for a unicorn-sized software model.

SAS was founded in 1976; in not-quite 40 years it has grown to 13,660 employees who produced $3.09 billion in 2014 from 75,000 customer sites in 139 countries.

Whether the drive stems from the demands of the investor world or the need for instant gratification, Wilkinson’s attitude is a breath of fresh air.

Raising venture money is a high risk commitment to go big or go home, and it isn’t for everyone. It certainly isn’t right for me, but neither is the surfer lifestyle business. I’m somewhere in the middle, with the Snyders of the world. I’m not a unicorn, I’m a horse.

Give it some thought or, to paraphrase an old commercial, “try it, you might like it.”

Image credit: HikingArtist

What do SAS; Warby Parker and Toms Shoes; FullContact; Petagonia have in common?

Flexibility, AKA work/life balance.

I’ve written about all of them and for the same reason—they get it.

They get that people are their most valuable asset; they get that replacing them costs far more than the cost of an ad; they get that top talent is looking for more than a fat paycheck.

Lisa Horn, who tracks workplace policies for the Society for Human Resource Management, which represents more than 200,000 members from the HR departments of companies around the world, said many businesses, which, since the Great Recession, have forced employees do more with less, are facing new realities: Millennials who value time for both work and life, and fierce competition for the most highly skilled employees who can easily jump ship for something better. “Already 87 percent of employees say flexibility and balance is important or very important in their next job. So it would behoove companies to adopt these strategies for competitive advantage.”

Companies that get it thrive and not just in the short term.

SAS has been doing it successfully since 1976; so much so that Google’s very own Larry Page and Sergy Brin visited to learn SAS’ approach.

Family-owned Patagonia has doubled in size and tripled in profits since 2008; it has 2,000 employees around the globe and minimal turnover.

A comment from TSD (10/24/2014 5:38) on the Petagonia article sums it up nicely.

I never have figured out why treating your workers well is such a hard concept for so many businesses. I work harder and faster and better when I’m happy and not terrified. Granted, I’ve never owned a business, but it seems pretty simple. Miserable workers will not be productive.

It’s not rocket science—or maybe it is.

Flickr image credit: Steve Jurvetson

Whenever culture is discussed it often is in terms of perks.

Google’s free meals, concierge services, etc.; when Apple was new and hot interviewees were told about the in-complex swimming pool and Friday beer blasts.

SAS, which is number one on Fortune’s Best Places to Work list for the second straight year, offers on-site healthcare, $400/month childcare, a beauty salon, 66,000-square-foot gym and more.

All are lauded for their cultures, but is it the perks or is something else going on?

“People stay at SAS in large part because they are happy, but to dig a little deeper, I would argue that people don’t leave SAS because they feel regarded — seen, attended to and cared for. I have stayed for that reason, and love what I do for that reason.” SAS manager

Sure, the perks are important, but they aren’t the basis of great culture.

Employees don’t leave companies, they leave managers… More than anything else, you want to create an environment where people are respected—and treated like they’ll make a difference…Jim Goodnight, founder and CEO.

Make a difference; that’s the key phrase and the key action.

That’s how talented managers in companies with mediocre perks or none at all build and motivate great teams. It’s also the reason why people who are stars at one company may not perform as well at another.

Popular wisdom agrees that people leave managers, not companies, and they leave them in spite of perks, benefits, stock and seniority.

Fabulous perks get lots of press and may attract candidates, but they can’t motivate or retain people if they feel used and unvalued.

Fickr image credit: http://www.flickr.com/photos/zedbee/103147140/

More proof that culture is the difference between winning, losing and turning around.

What can culture make happen? Just about anything.

What do Apple, McDonalds, IBM, Continental Air Lines and ABB have in common with Western Digital, U.S. Steel, Waste Management, Nutrisystem and Orbital Sciences? They all came back from near death experiences or brushes with irrelevance.

Culture drives everything that happens in a company.

Steve Jobs says that Apple has a startup culture and it was the culture he focused on when he came back to bring the company back from the brink.

When it comes to culture Jim Goodnight’s 30 year-old SAS is at the top of the heap and likely to stay there. Goodnight decided not go public because he “didn’t want analysts on Wall Street telling him how to run his business and forcing him to cut out the elements of SAS’s culture that give it an edge” and what an edge that is.

Finally, there is no way today’s column can end without a reference to Zappos.

You’ve probably already seen it, but the article in Inc. Magazine on why Zappos was sold to Amazon is actually an excerpt from Tony Hsieh’s new book Delivering Happiness: A Path to Profits, Passion, and Purpose.

In his column about Zappos Chris O’Brien supplies a great close to today’s post.

If you treat employees like they’re just a bottom-line expense, they’re bound to act like one, delivering the very least performance possible. And if you treat customers like they’re a problem, then they’ll eventually get the message and go away.

Image credit: pedroCarvalho on flickr

Everybody who writes about corporate culture, leadership, managing, etc. loves SAS. I’ve been following SAS since it was a segment on 60 minutes nearly 10 years ago and recently wrote about it here. The latest accolade comes from Scott McArthur in the UK, citing an article in The Economist.

Scott comments, ‘Such is the success of SAS that Google have been recent visitors to the campus. Just goes to show that you are never so good that you can’t learn from others.’ So true.

I love Goodnight’s comment regarding the difference between subsidizing food vs. furnishing it free.

When Google’s human-resources people visited SAS to get ideas for the Googleplex, they found much worth copying—though the internet giant has gone one step further with food, which is free to staff. Mr Goodnight considers that unwise, for tax reasons: “I keep telling Larry and Sergey you shouldn’t give away food—the IRS will come in.”

The article ends with The Economist saying, ‘…provided that the industry’s big beasts do not get the better of him. His philosophy of “managing for creativity”, Mr Goodnight reckons, will keep SAS in front. But the real test for his approach will come if the going gets tough.’

Gets tough? Seems to me that there’s been plenty of tough since SAS started in1976—competition, globalization, not to mention a few recessions—and they’ve survived them all.

What do you think? Is SAS’ ‘managing for creativity’ enough to mitigate its business risk?

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I was discussing performance (his) with a client today, and he said, “One thing I’m finding out is that it’s absolutely necessary to rest. The more rested I am, the better I am as a CEO. I’m too tired, much of the time, have too much busy work. I actually feel guilty when I’m not working to my maximum or over it—I need to change my mindset.”

He’s right—and it applies to every level, from execs to admin. Jim Goodnight, CEO of SAS, who works nine to five and doesn’t bring work home, discourages his employees from working extra hours. He says, “Quite frankly, the type of programming that goes on in the employee’s ninth and tenth hour is usually thrown away the next day — it’s usually not very good. You just start making mistakes -— you get sloppy.
“I would rather you go home and rest, and come back fresh the next morning, instead of spending all morning correcting mistakes made last night when you were too tired.” (I recently cited this interview in another post)

If you, too, want to get rid of busy work, change your mindset and get to know your family/community/hobbies/etc. again, here’s how to start.

1. Separate out everything you can delegate or outsource. This often requires a change in your MAP, the part that accepts that others can do the work, whether they do it in the same way as you or not, and the results will be at the least adequate, possibly better. (It’s called letting go and it’s not as easy as it sounds, especially for entrepreneurs and owners.)
2. Take what’s left on your list and evaluate it on a what-if scale. That means you run each task against the question, “What really happens if this doesn’t get done today or this week?” Will the earth shift on its axis? Will a thunderbolt strike? Will our competitors kill us? Will our customers desert us? Will our employees revolt? Will the company fold?

Although similar to prioritizing, this is different. Most prioritizing is done in a now mode that often gives stuff a higher priority than it deserves. Running it though the what-if filter adds a reality check that frequently removes the item from “today” and, at times, from the list completely.

I have yet to have a manager do this who wasn’t amazed at the results and at the amount of time that was suddenly available.

Just remember, that new time isn’t for more work, it’s for more rest, fun, bonding, etc., both inside and outside of work.

Once you learn to use a what-if filter, share the skill with your organization, and watch both productivity and retention improve.

Enviable stats: 2006 revenues 1.9 billion; 31 years of consecutive revenue growth; no debt; 10,087 employees worldwide; 4% turnover.

According to Jim Goodnight, founder, president and CEO of SAS International, the world’s largest privately owned software company, ‘Employees don’t leave companies, they leave managers… More than anything else, you want to create an environment where people are respected-and treated like they’ll make a difference… I think the success of the company has been, to a large degree, due to the benefits we provide because it has made our people very happy, to want to stay on… My philosophy has always been: You either spend money on your employees, or you spend the same amount of money on headhunters, recruiters, on training, on lost-productivity.’

No doubt about it, Goodnight has great MAP, but it’s doubtful that Wall Street will ever learn the lesson and adopt his philosophy. However, you can—even without being able to fund the same benefits.

Start by really respecting all your people. I know too many managers who only respect their ‘stars’ and then wonder why turnover is rampant in the rest of the organization.

Provide as much tangible proof as possible that you value your workers, from health care to chocolate, but don’t kid them that the company can’t afford something that is obviously feasible. You’re people aren’t stupid, they know the score, and if you want to build trust then tell them the truth.

No matter how great, those benefits don’t give you the right to disrespect them. It’s not a tradeoff—you don’t get to micromanage, insult, play favorites, or bully your people just because the company offers health insurance.

Things you can do

• Check out turnover rates in your industry, compute your own—whether for your company or just your group—set a reasonable improvement target, then work to achieve it.
• Evaluate your MAP by talking to your people and really listening—even when you don’t like what you’re hearing—and work on changing it.
• Find out what else you can change/offer that would make a difference; do as many as you can and be honest about why you can’t.
• As the song says, ‘little things mean a lot…,’ so add as many small gestures as possible to show your appreciation.

The bottom line—if you treat your people as replaceable don’t be surprised when you have the opportunity to do so.