I had an opportunity to witness two distinct cultures in action in my personal life this past week. I am in the Tampa Bay area of Florida. Like most mid-market cities there are several startups and rising companies throughout. I have friends at two that have had events transpire as of late that had two completely different outcomes and I wanted to share my observations.

One company that is located here is backed by VC’s and has been growing rapidly. They have a great culture from how I understand it. Very laid back, treat you like a friend and encourage all team members to go beyond their own role to take on more responsibility.

My friends who work there always talk about the company with pride and enjoy working there. The CEO is a thought leader in the community and can cut to the core of what is needed to accomplish the job.

In my current role, I also use this company as a customer. They provide data on prospects from several databases. It is not unique as there are many in this space, but they provide an excellent customer experience and the data is usually accurate.

Last week we were told that we would no longer be able to access the application. I reached out to my friends and it was the worst news you could hear.

The company was not able to secure another round of funding and they had to close their doors.

This happened basically overnight. They were brought in on a Tuesday told the bad news and sent on their way.

My first reaction is that the folks who worked there would be bitter about the company and the way they were let go. That could not be further from the truth.

Are they out of jobs? Yes. Do they need to scramble to pay bills? Yes. However, they also felt like they were a part of something bigger than themselves.

President Theodore Roosevelt famously spoke about the man in the arena, “The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming….”

These folks were in the arena and were honored to have strived. They spoke positively of the company and its CEO, realized sometimes you lose and looked at the opportunity to learn as a valuable experience.

In my opinion life is about balance. In the same week as the above news broke I had some friends at another company I am familiar with share some news.

This company is no longer a startup; I would call them a rising company. No VC backing, the CEO started with his own money and they have been profitable through customer acquisition for some time. (I realize if you are in Silicon Valley you may find the concept foreign, but it does still happen.) This company started out with a great culture. Awesome offices, snacks and coffee, smart folks to work with. From the outside looking in it is very desirable.

This company has been on the decline with sales in recent years. It could be the industry it serves or that the products haven’t adapted to the needs of the marketplace.

Speculation from my friends has ranged as they truly believe in the company and its founder. He is a thought leader as well, spends a lot of time with Richard Branson and other luminaries, and is extraordinarily intelligent.

However, sales have been down and it has caused strain on the company.

They recently released the new comp plan for the sales team.

We could discuss how releasing a comp plan in month five and making it retroactive to January is a problem, but that’s not the point of this post.

The team was excited to hear what the new plan would be as some of the teams hit and surpassed their goals last year and figured they would be honored for that.

This could not be further from the truth. The new comp plan essentially cut their income by as much as 30%.

Now the average income for these folks was between $100,000-$150,000 annually. 30% is a huge cut and most may not be able to absorb that. Six figure deals that would bring in commissions of five figures dropped in some cases to the hundreds in commission earned on that deal. I’ll let that sink in for a moment. What’s the incentive to work!

The reaction from my friends there was as expected. They felt betrayed.

This company strives in being inclusive, expecting hard work from the team and tries to create a fun atmosphere.

These folks are invested, they love the company and the friends.

However, when you sign on and are told that you will make X amount and the company flips that on you halfway through the year it causes issues.

I cannot imagine how you would expect a great effort out of team members who feel betrayed and are now worried about paying bills.

Two different companies, two different outcomes.

How would you do it differently?

Flickr image credit: Anthony Albright

It’s amazing to me, but looking back over more than a decade of writing I find posts that still impress, with information that is as useful now as when it was written.

Golden Oldies is a collection of some of the best posts during that time.

I wrote this in 2012 with high hopes that more bosses would move in Chris’ direction, with an eye to making their workplaces more socially responsible and individuals more aware of the world outside their little corner of it. Sadly, the importance of ‘me’ has grown considerably, dwarfing, at least in the media, those who strive to move beyond that narrow focus.

Read other Golden Oldies here.

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

I met an interesting guy over the holiday.

“Chris” has a small startup in the financial services sector and is starting to gain traction.

He said it’s been an uphill battle and that he wishes he had spent the same energy doing something “socially responsible,” because it would be a lot more satisfying.

I’ve heard similar comments from other entrepreneurs and small biz owners.

Happily, this is one of those times it is possible to “have it all,” because all it takes is changing the way you look at the world.

Having a socially responsible business doesn’t require a focus on solving social ills and it certainly doesn’t mean forgoing profit—without profit your business won’t be around.

It does mean running your business in a responsible manner

• pricing fairly, passing on savings whenever possible and never gouging
• fair wages and other compensation
• fair employee treatment (not playing favorites, etc.)
• reducing your carbon footprint
• community involvement and contributing whenever possible; and
• believing that it’s not all about you.

None of this is rocket science and all of it makes good, profitable, business sense.

In fact, Chris and others who feel the pull to help fix the world would do well to read Richard Branson’s Screw Business As Usual to see how others are ‘doing well by doing good’.

Note: the unseen pause is between ‘screw’ and ‘business’, not between ‘business’ and ‘as’,

Image credit: HikingArtist

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

Last week KG shared a quote from Marc Andreessen.

“First and foremost, a start-up puts you on an emotional rollercoaster unlike anything you have ever experienced. You flip rapidly from day-to-day – one where you are euphorically convinced you are going to own the world, to a day in which doom seems only weeks away and you feel completely ruined, and back again. 

Over and over and over. 

And I’m talking about what happens to stable entrepreneurs. There is so much uncertainty and so much risk around practically everything you are doing. The level of stress that you’re under generally will magnify things to incredible highs and unbelievable lows at whiplash speed and huge magnitude. 

Sound like fun?”

It’s likely Marc wrote this with founders in mind, but it applies to all employees, as well as those whose lives are connected in whatever way — spouses, kids, relatives, friends, etc.

Actually, it is worse for them, because they rarely have a full picture of what’s going on.

Sometimes that’s good; workers need to concentrate on their work.

But they also need to know when difficulties arise; they need to know if their job may be going south.

They need honesty and transparency from the person they’ve chosen to follow and whose vision they are working to make real.

It’s part of the social contract Matt wrote about a few years ago.

It’s Zach Ware’s focus about what to do when a startup needs to close.

It’s what the founders of Shift and WrkRiot chose not to do — to the total detriment of the people who trusted them.

It’s my recommendation regarding bad news.

It’s on you because it’s your rollercoaster, your responsibility to do the safety checks and your job to notify people before it jumps the track.

Image credit: HikingArtist

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

In June we learned the right way to close a company and last month we got a lesson in the wrong way to do it.

Right, wrong; what’s left?

(Allegedly) crooked.

How crooked?

Penny Kim is a marketing professional who relocated from Dallas in July to work for WrkRiot (formerly known as 1for.one and apparently also known as JobSonic) for $135,000 a year plus equity and a $10,000 signing bonus for relocation expenses,

It ended with her dismissal in August after she filed a complaint with the Division of Labor Standards Enforcement over failure to properly pay her

If you wonder whether she’s just another disgruntled employee, she’s not.

Not when the CEO gives everyone faked documentation of wage payment.

“Thursday, August 4th was D-Day … That afternoon in the office, Michael emailed each employee a personalized PDF receipt of a Wells Fargo wire transfer with the message: ‘Here is the receipt. It has been calculated for the taxes on your semi-monthly salary and signing bonus. The money is arriving either today or tomorrow. I am sorry about the delay.'”

But the receipts were fake.

Al Brown, former CTO and one of the founders, confirmed much of her account, even the most outrageous accusation: The CEO she dubbed “Michael,” whose LinkedIn profile identifies him as Isaac Choi, gave employees fake receipts for money wire transfers to convince them the company had paid their back wages when in fact it hadn’t.

Not even a good fake, since the photoshopped receipts said 2014.

Even after that two employees lent the company an additional $65K.

All told, Choi burned through $695,000 (his own initial $400,000, Brown’s $230,000 and the borrowed $65,000) in less than a year.

A comment on Hacker News should serve as a bona fide caveat emptor for everyone in the global startup world, not just in Silicon Valley.

“Welcome to the club. It’s pretty much a rite of passage here to spend some time with a psychopath VC, a completely self absorbed CTO with a rich investor dad that fuels his fantasies, or an idiotic CEO with an ego problem, and to pay the price for it (just time if you’re lucky, time+money if you’re not).”

This isn’t a warning not to join, just a note to do so with your eyes open.

There’s a reason it’s called “due diligence” and it’s as much for employees as it is for founders and investors.

Image credit: HikingArtist

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)

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

In 2011 serial entrepreneur Matt Weeks described what he calls the “startup social contract”. In it he talks about the tradeoff of salary for equity and that the basic premise is that the employees have the company’s back, the company has theirs and what happens if it is violated.

If the workers and/or the exec team come to disrespect, disbelieve or ignore this social contract, the company is lost.

Zach Ware, managing partner of VTF Capital, adds another dimension to what it means to have your people’s back and it’s crucial information as funding tightens.

“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.”

Ware spells it out by comparing what he did in his own startup, Shift vs. what Maren Kate Donovan, when she shut down Zirtual and laid off 400 people by email.

To start with,  Donavon claimed her CFO gave her incorrect numbers (he denies it) and that she was pitching to the last minute.

“The reason we couldn’t give more notice was that up until the 11th hour, I did everything I could to raise more money and right the ship.”

In actuality she bet 400 other people’s lives on a roll of the funding dice and then took the coward’s way out using email.

Ware finds her reasoning specious.

“Every founder should have a real-time understanding of their business. It doesn’t matter who does it. You have to know it. You have to know your horizons,”

Choosing to not only be a founder, but also CEO, means that, when all is said and done, the buck stops with you. Period.

No reasons, no excuses.

Image credit: HikingArtist

I’ve been writing a lot about Silicon Valley culture and, since I don’t live there any more, I usually cite/link to articles from those deep in the tech world who do or who write me directly.

Yesterday a question came in on my Quora feed that asked about the differences working in SV vs. the rest of the country.

If you ever wondered if media descriptions and commentary were hype, propaganda, sour grapes, ignorance or a combination thereof, then you really should take time to read the responses, especially Ken Miyamoto’s.

Miyamoto is a non-tech guy who, at the decrepit age of 39, moved to SV and ended up working for “one of the the most badass and innovative tech startups.”

We have this culture of brilliant kids that have a power that they can implement from a numbers perspective, but often (not always) fail miserably at implementing from personality perspective, yes, but even more so from a social perspective within the workplace and anything involved with that. (…)

There’s a clear disconnect, socially. I don’t know if it’s the generation. I don’t know if it’s the inability to balance responsibility of  power and position or ego or what have you. But there’s clearly a disconnect. (…)

The SV is an environment that is overly self-serving, self-rewarding, with little to no practiced responsibility of the social aspect of “the game.”

Beyond that, the SV proved too often be an overly analytical and knee jerk reactionary culture. Here you have young kids thrust into powerful (big or small) positions and, well, they act like young kids.

So to me, the Silicon Valley is a perfect storm of brilliance, power, new culture, money, money, money, and utter lack of social responsibility at times. (…)

That’s the major difference. Going from student to “rock star” so quickly. It leads to ego, blindness, paralysis of analysis, etc. And that culture is ever-spreading with Venture Capitalists young and old ready and willing to profit from it. 

Too many of the tech crowd have lost touch with the rest of society, don’t possess the skills to re-enter it and don’t see this as a problem, but the long-term result of losing touch with humanity is to eventually lose one’s own humanity.

(Funny how one’s mind works. I’m not sure why, but writing this reminded me of Isaac Asmiov’s Foundation series. In short, the series tells the story of mathematician Hari Seldon, who spends his life developing a branch of mathematics known as psychohistory, a concept of mathematical sociology. It is disrupted by an outsider known as the Mule, who was not foreseen in Seldon’s plan, so there is no predicted way of defeating him. Although I can’t connect it directly to the current love of data analytics, I’m sure it does and highly recommend it to you.)

Flickr image credit: kristy

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

I rarely have time to read my Quora feed, but now and then I see a question that pulls me up short as happened when this question from last fall surfaced.

I am an entrepreneur about to get married. How do I make sure my future wife doesn’t benefit financially from our union?  

My reaction was that his fiancée should run as fast as possible in the other direction, since this guy doesn’t seem to have either the understanding of what marriage is or the maturity to build a successful one. (Most of the responses echoed my reaction.)

Thinking further, I wondered whether this entrepreneur honored what Matt Weeks calls The Startup Social Contract at his company, since he obviously didn’t with his wife-to-be.

Marriage, after all, is the ultimate startup and the risks are even greater when an entrepreneur is involved.

Image credit: HikingArtist

Last fall I asked if the 1099 economy might crash and burn considering the IRS rules governing freelancers and contractors.

I think that companies, like Uber and Instacart, etc., whose success is built on the basis that their workers aren’t actually employees are in for a shock one of these days.

But it’s more than my opinion.

Way back in 2013 a group of strippers brought a class-action lawsuit claiming employee status — and won.

Rick’s, a chain of “upscale adult nightclubs serving primarily businessmen and professionals” based in Texas, argued that its dancers were independent contractors, more akin to stand-up comedians than fry cooks. But Judge Engelmayer was not persuaded. He said the list of rules Rick’s laid down could be described as “micromanagement.”

Rick’s provided “Entertainer Guidelines,” including required heel height and when to strip; the company also set prices.

Uber tells its drivers what to wear, car requirements and sets prices, as do other 1099 employers.

One day soon, a few fed-up drivers are going to file suit and their lawyers will likely cite the judgment against Rick’s.

When that happens, compensation will change, as it did years ago with Microsoft’s contract developers (who were also awarded stock retroactively), and, hopefully, the playing fields will be leveled.

I, for one, am looking forward to it.

Image credit: HeadOvMetal

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

I hear a lot of bull disguised as best practice from founders (and other bosses) regarding hiring and management.

• We only hire stars.
• All our people are self-starters.
• Our people are self-managing.
• We’re not into hand-holding here.

And all forms of variations on the theme.

The reason it’s bull is that most people prefer to be part of a cohesive team (think family)—with the exception of those who are out for themselves and their own glory.

The smartest founders know that it’s the power of the team that confers long-term success.

Christopher W. Cabrera, founder, president and CEO of nine-year-old Xactly is a good example.

He has a 300 person workforce, mostly in their early thirties, which means most were in their twenties when hired.

He uses a prominently displayed rubber band ball to drive home how the company works.

Every month we have an all-hands meeting where every new employee puts their rubber band on the ball. Rubber bands come in all different sizes, shapes and color. Together, when they’re combined, they take on a whole new set of properties and the ball can be bounced or thrown where an individual rubber band can’t. So our motto is, “That’s how we roll.” Somewhere in that ball is my own rubber band. There is no single band in there that’s more important than any other. It’s the collective that counts. Our employees are part of something bigger and we’re trying to build something great.

Take note: no stars.

Hall of Famer and current SMU (turnaround) basketball Coach Larry Brown puts it this way,

“They all want to be coached. They all want to get better. They all want somebody who cares about them.”

Which pretty well sums it up.

A place to make a difference and a boss that gives a damn.

Image credit: HikingArtist