Yesterday’s post focused on the importance of financial controls.

Unicorns focus on funding.

The “horses” talked about yesterday are focused on profit and building sustainable business.

But when it comes to valuation, founders often focus on just one number: the magic B (as in billion).

This was analyzed in great detail in a post from CB Insights last month.
On the 31% of unicorns that are worth exactly $1B, partner at Lightspeed Venture Partners Jeremy Liew wryly noted (via this tweet) that it’s “potentially not a coincidence.”

Investors are still enamored by founders with their fast talk and passionate visions to “change the world.”

However, enamored or not, when funding, investors focus closely on CYA.

Which is easy, since investors have all the leverage, because they dictate the terms.

This is what is happening to get that exact $1B valuation. Even if the fundamentals don’t justify the $1B valuation, the investors can lay on enough structure and terms to get the founders to a $1B headline valuation (while investors have the protections they need). With the $1B valuation, founders get:

• desired media exposure to attract talent
• bro-grats tweets
• conference speaking gigs
• a place on this list

Of course, it’s the programmers, marketers, sales and support who actually build the products that will pay the price for the inflated valuation.

In these exit situations, common shareholders, aka employees, get fleeced.

Harking back to 2015, money has tightened again and being profitable is at the forefront of founder thinking — mainly because it’s the focus of investors.

Stockpiling cash is at odds with the model of most venture capital-backed start-ups, which typically raise piles of money to spend on growing faster. Many investors are now pushing their companies to turn a profit.

Shades of déjà vu.

Image credit: Purple Slog

A few days ago CB insights shared a link to their collection of quotes about disruption from big name corporate leaders; they called it Foot In Mouth.

I sent it to my “list” with the following comment.

Ignorance? Idiocy? Arrogance?
All of the above?

The replies I received, one from my sister, a retired IT head, and the other from KG, were far more insightful than the queries I sent.

I thought both were worth sharing, so here they are.

From my sister.

Do you know of Joel Barker, the futurist?  He’s been around since the mid-70s. I saw a video of his at a conference once, where he talked about paradigm shifts. His example then was Swiss watch makers. When two young kids brought the quartz watch to the Swiss watchmaking community for funding, the Swiss said, “No one will ever want a watch that doesn’t wind.” The kids went to the Japanese and the rest was history. Barker says that when humans have a paradigm, they automatically filter OUT anything that doesn’t support their paradigm. The Japanese had no watch paradigm and so could see the potential. I think those examples from CB are as much paradigm lock-in as stupidity. Or put another way, paradigms lead us to make dumb choices sometimes.

From KG

Upton Sinclair famously stated, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” We may call it stupidity, but it really is vested interests. That’s why innovation comes from those who have little to lose or have no other alternative. No one thinks of vested interests when they work in our favor, only when (usually in hindsight) they are show to have caused loss are they called stupid.

In a time of proven global warming, the US has chosen, as the only nation in the world, to reject the potentially cataclysmic consequences of a warmer globe and have invested $4 trillion to develop the domestic oil & gas industry rather than investing these monies in future technologies that can save the planet. These vested interests are causing an existential crisis, and all the systems we’ve built.

There are so many areas that we are struggling with as a species due to vested interests — things that threaten our survival. These range from the ones that are commonly spoken about, like global warming and environmental destruction. They also include synthetic chemicals and nano materials that are giving us cancer and making us sterile, an economic system that ignores externalities and the tragedy of the commons, and our challenges with making sustainable decisions in an increasingly complex World.

What are your thoughts?

Image credit: Gerd Leonhard

In spite of my dislike of social media I know there is interesting stuff lurking amidst the inane, the garbage and the hate.

Fortunately, much of what I’m missing is referenced in stuff I do read, such as CB Insights, which is where the following showed up.

And here’s a link to my approach to make passwords easy.

Image credit: CB Insights

As I’ve said before, one of the smartest moves you can make is to sign up for the CB Insights newsletter. It’s got more going for it than just the data, although that is excellent.

If you take time to read it and actually pay attention to the construction, design, organization, and the writing itself, you will be miles ahead when it comes to your own efforts.

Assuming, that is, you consider a subscriber list of more than 485,000 to indicate success.

While several people author specific editions (health, fintech, etc.) It is one of the founders, Anand Sanwal, who originally wrote all of them and it is his intelligence, skilled writing, irreverence and quirkiness that set the tone. Amazingly, the other authors have similar writing skills.

One of the greatest pleasures, to me, are the odd bits that Anand provides, such as this one, that he calls “everyone before me was dumb.”

Sometimes a new person joins your team and immediately decides the way things are done is stupid and/or inefficient. They invent their own process without taking the time to understand why existing processes are in place.

Bobby Ghoshal and Nick Stamas designed this brilliant framework that describes this situation.
They’ve dubbed it The Prior Idiots Phenomenon.
This might be good to include in employee onboarding everywhere.

Managers love to hire people whom they believe can “hit the ground running.”

However, that doesn’t mean to hit the ground running roughshod over the culture, processes, ways and means that you know nothing about, because you have a better approach.

We’ve all been there, but hopefully not done that.

Or at least won’t do it again in the future.

Image credit: CB Insights Newsletter

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

Did you read Ryan’s Journal yesterday? One of the things he talks about it the importance of starting with ‘why’, instead of just rushing in.

I get it, ‘because I’ve always been a ‘why’ person.

Founders would do well to ask ‘why’ more often, as in “Why are we building/doing this?”

The importance of that particular ‘why’ is data-driven, which is important, since the tech world especially believes that everything important is data driven.

I can cite dozens of sources, but I’ll use data from CB Insights, since it’s a startup and it’s product is data.

Tackling problems that are interesting to solve rather than those that serve a market need was cited as the No. 1 reason for failure, noted in 42% of cases. Or, as Treehouse Logic said, “We had great technology, great data on shopping behavior, great reputation as a thought leader, great expertise, great advisors, etc, but what we didn’t have was technology or business model that solved a pain point in a scalable way.”

A lot of people don’t like asking ‘why’, because, more than most, it is an uncomfortable question.

It usually requires introspection and frequently doesn’t return the desired answer.

Founders don’t like the why question for the same reasons, especially when it interferes with their beloved vision, let alone their worldview.

There are two ways of internalizing that data.

The obvious: Not asking ‘why’ increases my chance of failing by 42%.

The less obvious: Asking ‘why’ increases my chances of succeeding 42%.

If you subscribe to the less obvious approach, or want to, the simplest was to implement it is to embrace the Lean Startup methodology

Doing so may mean abandoning your initial vision, or, at the least, tweaking it, which could bruise your ego, but the payoff is huge.

And the bruising should be easier to handle knowing that you got a 42% boost on the road to success.

Image credit: HikingArtist

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

As I keep saying, I do love CB Insights daily newsletter. It provides me with needed information, but my love stems from Anand Sanwal’s quirky, irreverent, incisive comments, like this one.

I now see toothbrushes in a whole new light after this comment by the founder of a subscription-as-a-service toothbrush company.

Does this guy actually believe that something (AKA a toothbrush) that has no wheels, software or circuits can substitute as an “extension of personality?”

The only “change the world” ethos I can find here is greed coupled with the ability to sucker people who are either too lazy, too incompetent or too busy on social media to take care of their basic necessities.

Good grief, is this the best the vaunted Silicon Valley innovation machine can produce?

Image credit: HikingArtist

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

Regular readers know I have a thing for CB Insight’s co-founder Anand Sanwal and the newsletter he writes. The great data is a given, but the real draw for me are his common sense and wicked sense of humor, both of which infuse his prose creating an irresistible combination.

Monday’s newsletter shared a contrarian view of failure taken from his presentation at last year’s at SaaStr.

Acknowledging and being ok with failure is one of the best things about the startup community. We now celebrate the act of writing a startup failure post-mortem as courageous. (…)  Most are vapid puff-piece post-mortems that talk about being too early to market or suggest investors weren’t committed or offer up trite discussion of why they’ve joined a “larger platform” whose vision aligns with theirs.

Once again Anand is my hero by saying stuff out loud that needs to be said.

I’ve always believed that failure is a learning opportunity, but I never thought it should be enshrined and lauded.

Any more than Mark Zukerberg’s “move fast and break it” should have become a startup mantra.

Anand ends with this comment.

Now, even when you fail, you are a success.

Yup — in Startupland, everyone is a winner.

It reminds me of today’s “everybody gets a trophy” attitude.

Jean M. Twenge, author of The Narcissism Epidemic: Living in the Age of Entitlement. “But the ‘everybody gets a trophy’ mentality basically says that you’re going to get rewarded just for showing up. That won’t build true self-esteem; instead, it builds this empty sense of ‘I’m just fantastic, not because I did anything but just because I’m here.’”

That attitude permeates everything else, so why should Startupland be any different?

Image credit: HikingArtist

For better or worse I earn my living wordsmithing content, such as websites, blog posts, presentations, etc.

Today was definitely worse.

That’s because so many senior business people believe that stringing together trendy, multi-syllabic words spotlights their intelligence and impresses their target audience — whether investors, employees, or customers.

The presentation I’m working on is so loaded with jargon that I wonder if they didn’t use some equivalent of the The Corporate B.S. Generator I read about on CB Insights (the last item in the Blurb).

While I would never use a real excerpt, I used the BS Generator to create a bit of content similar to what they sent.

We at Opaque Inc. work hard to dramatically foster efficient technologies for our clients in an effort to globally customize specific integrated methodologies. Our goal is to overcome intervening challenges and quickly restore compelling value.

Are you impressed?

Do the ideas presented increase your confidence and enhance your desire to become a stakeholder?

Or are you more likely to walk away scratching your head and wondering what they actually do?

Image credit: Wikipedia

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

You could be a

• charismatic, visionary leader;
• talented manager;
• brilliant developer;
• fine storyteller; and
• able to raise multiple, large investment rounds.

You could still fail.

Why?

For the same reason nearly half of startups fail.

42% of startups fail because of no market need according to CB Insights.

Peter Drucker says it best.

Image credit: HikingArtist

I know it gets old, but here is yet another reason to subscribe to CB Insights newsletter. At the end there is a section called The Blurb that provides four links to exceptionally excellent content, such as

Mark Manson’s thoughts on “passion.”

Manson is referring to the oft stated advice to new grads to “find your passion” when looking for work. Seems a lot of those people write him saying they don’t know what their passion is and asking how to find it.

But more importantly, what I want to say to these people is this: that’s the whole point — “not knowing” is the whole fucking point. Life is all about not knowing, and then doing something anyway. All of life is like this. All of it.

He points out some basic truths about work and passion/loving what you do.

• Priorities, like buying food and paying the rent/mortgage, often trump passion.
• You can work for the priorities and spend the rest of your time on your passion.
• Even your dream job will include parts that suck and some days when it all sucks.

If you’re passionate about something, it will already feel like such an ingrained part of your life that you will have to be reminded by people that it’s not normal, that other people aren’t like that.

If you have to look for what you’re passionate about, then you’re probably not passionate about it at all.

A child does not walk onto a playground and say to herself, “How do I find fun?” She just goes and has fun.  

Further,

• You won’t find your passion in a set of data points.
• Nor will you find it by looking/asking/ranting/whining.
• Just because your best friend loves their job doesn’t mean you would.
• People change. Your passion at 25 may not be your passion at 45, let alone at 65.

Don’t just read Manson’s essay, think about it and then apply the lessons learned to your own life.

I guarantee you’ll be a far happier/satisfied/passionate person.

Flickr image credit: gorfor