John Greathouse http://johngreathouse.com Hands-on startup advice for emerging entrepreneurs Mon, 22 Jun 2015 12:00:55 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.2 Oh Yeah, That Powerful Computer In My Pocket Is Also A Phone http://johngreathouse.com/oh-yeah-that-powerful-computer-in-my-pocket-is-also-a-phone/ http://johngreathouse.com/oh-yeah-that-powerful-computer-in-my-pocket-is-also-a-phone/#comments Mon, 22 Jun 2015 12:00:55 +0000 http://johngreathouse.com/?p=5697 A version of this article previously appeared in Forbes. Facebook recently joined Google and Twitter by offering a click-to-call functionality in its ads, giving consumers an option to call businesses directly, versus […]

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A version of this article previously appeared in Forbes.

Facebook recently joined Google and Twitter by offering a click-to-call functionality in its ads, giving consumers an option to call businesses directly, versus emailing them or completing an online form - effectively making the plain old phone one of the most powerful on/offline marketing tools of the coming decade.

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140 Years Old And Still Kicking

Why are the world’s biggest Internet companies investing in a technology created in the late 1800’s? Despite the fact that phone calls have been around for over 140-years, they represent the next tsunami of marketing dollars. People continue to surf the web to gather information when making a considered purchase. However, when they are ready to buy, they now stay on their handheld supercomputer and place their order by initiating a call. This approach of guiding consumers online and then offline (on/offline) through the purchasing process represents the future of commerce, whether it is online to a call or online to an in-store visit.

It’s undeniable that consumers are digesting more online content on the mobile supercomputer in their pockets than via any other modality. So much so that Google recently reported that mobile search has finally overtaken desktop search, and Facebook rolled out a new app called Hello that connects the dots between people’s social and phone contacts.
To shed light on the future of online calling, one of Rincon Venture Partners’ portfolio companies, Invoca, analyzed 32 million phone calls, across 40 verticals. The results were recently published in the 2015 Call Intelligence Index.

Some of the key points I took away from this research include:

  • 54% of all calls stem from engagement on a mobile device; mobile search marketing is the top driver, responsible for initiating 45% of calls
  • 75% of all calls to businesses originate on a mobile phone
  • Non-mobile, online channels, such as desktop search, display ads and review sites drive 30% of calls
  • Offline channels drive just 16% of calls; the phonebook, accounts for just 2% of calls to businesses

The average call duration is 16 times longer than a website interaction, at 4 minutes, 7 seconds

To better understand how this trend is impacting marketers, I reached out to Matt Miller, SVP, Analytics & Technology at the global marketing agency Performics. Matt shared with me a number of interesting insights, including that his firm has, “... gotten pretty good at implementing call intelligence platforms which economically connect brands with their omni-channel marketing strategies. Call analytics are helping (our) clients prioritize (phone) conversations with customers who are more likely to buy, which makes marketing strategies more profitable. The ROI from tools like Invoca are so clear that our clients are asking to extend this across more areas of their organization.”

Though the lines are blurring between online and offline interactions, it is now more important (and challenging) than ever for marketers to clearly understand the return generated by all their customer channels, including phone calls. Companies like Invoca and IfByPhone are uniquely positioned to help online advertisers monetize old-fashioned phone calls.

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Entrepreneurs Who Relish Being Wrong Usually Win http://johngreathouse.com/entrepreneurs-who-relish-being-wrong-usually-win/ http://johngreathouse.com/entrepreneurs-who-relish-being-wrong-usually-win/#comments Mon, 15 Jun 2015 12:00:38 +0000 http://johngreathouse.com/?p=5679 A version of this article previously appeared in Forbes. During my 15-years as a startup executive, I relished being proven wrong. Knowing that I was […]

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image001A version of this article previously appeared in Forbes.

During my 15-years as a startup executive, I relished being proven wrong. Knowing that I was had made a mistake empowered me to make the correct decision. Being wrong is much preferred to erroneously thinking you are right and relentlessly executing a losing strategy. Effective entrepreneurs reject dogmatism and embrace doubt.

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Human Nature Sucks

How can two otherwise intelligent and well-meaning people watch the same political debate and adamantly believe that their candidate won? Confirmation Bias.

Psychologists define confirmation bias as: “A tendency to search for or interpret information in a way that confirms one's preconceptions, leading to errors.” Not only does this proclivity cause us to seek affirming information, once we find it, we tend to value it more highly than data that refutes our beliefs and we can recall confirmatory facts long after conflicting information has been forgotten.

For instance, when the United States Postal Service recently issued a stamp of poet Maya Angelou with a quote from another woman, it reinforced my belief that the federal government is primarily comprised of incompetent, unmotivated workers. Stories which refute my belief careen by me undetected, but the Maya Angelou debacle will live on in my heart for decades to come.

Like most mental shortcuts, our tendency to seek out and believe data consistent with our beliefs fulfills an important role in our psychological makeup. If you questioned your core beliefs every time you came across a countervailing fact, your life would be rather dismal and anxiety ridden.

While this aspect of human nature can lead to mildly amusing behaviors in our friends (and ourselves), when assessing decisions at your startup, such close-minded prejudices can result in fatal mistakes.

Be Tacky

Startups survive by constantly making small mistakes and correcting them quickly. In this regard, CEOs are akin to sailboat captains. Both operate exposed to the elements, and surrounded by a handful of dedicated people who all impact on the company’s / boat’s direction.

Rather than establish an extensive strategic plan detailing how they will reach their destination, the startup crew simply aligns their sailboat with a distant point on the horizon. The startup CEO must then propel the ship forward by tacking the ship’s bow into the wind. This process results in a zigzag pattern as the Captain makes slight adjustments to address the vagaries of the breeze, waves and currents. However, as shown below, the ship’s general direction remains relatively unwavering.

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Confirmation bias is particularly dangerous at startups, as it slows down these vital course corrections. Rather than zigzagging in a relatively straight line, a startup stricken by confirmation bias ignores valid market signals and risks driving toward an errant point on the horizon.

For instance, if the team assumes that a higher price will result in a lower number of customers, it will have a tendency to recall those instances when a customer cancels due to price. At the same time, the team may unconsciously discount data that shows an uptick in sales beyond what could be attributable to a higher price.

I experienced this situation when we raised the price of GoToMyPC from $9.95 per month to $14.95 per month. Despite the 50% price increase, our sales exploded. When we asked our customers what motivated them to purchase GoToMyPC, many of them indicated that the higher price gave them greater comfort that our solution was a business, and not a consumer, product. This price change generated tens of millions of incremental revenue and allowed up to properly position GoToMyPC as trusted SMB solution.

Breakdowns Lead To Breakthroughs

Steven Johnson, author of Where Good Ideas Come From notes that, “Being right keeps you in place, being wrong forces you to explore.” He cites several examples of this phenomenon, including: (i) Alexander Fleming’s discovery of penicillin from a contaminated petri dish, (ii) Louis Daguerre divining analog photography after he stored some silver plates with random chemicals and images ‘magically appeared,” and (iii) Charles Goodyear noticing that sulfur and heat were the missing ingredients of vulcanization after he inadvertently warmed a sulfur-covered piece of rubber on his kitchen stove.

In all of these instances, the potential breakthroughs could have easily been overlooked as unfortunate mishaps. Fortunately, these innovators maintained an open-minded when the interpreted their counterintuitive observations. Unfortunately, most of us are not prone to such clear thinking, which leads one to ponder how many monumental breakthroughs have been thwarted by confirmation bias.

By definition, confirmation bias creates perceptual blind spots, as we only see what we expect (and often want) to see. Wily entrepreneurs proactively mitigate this perilous tendency in a variety of ways, including:

Embrace Your Bias – As with any recovery program, the first step is to admit you have a problem. Confirmation bias is not a sin, just a sign that you are human. By acknowledging its existence, you increase your odds of countering its potentially negative effects.

Seek The Truth (Ignore Who Is Right) – Strive to prove your assumptions wrong, just as a scientist tests the veracity of a hypothesis by trying to disprove it.

Separate Personalities From AnalysisPsychological studies consistently confirm that the loudest, most repeated opinions have the greatest influence on group behavior. This effect can be tempered by de-personalizing discussions so that aggressive members of your team feel less obligated to prove themselves right.

Make Cross-Disciplinary Decisions – Small teams of believers and dissenters often result in intellectually honest outcomes. It is also an effective way to mitigate the outsized influence of a forceful personality.

Discard Beliefs, Cultivate Assumptions – People tend to fight for beliefs, while assumptions are rarely personalized.

Encourage Diversity Of Thought – A heterogeneous team’s divergent backgrounds and experiences enhance its creativity and ad hoc problem-solving abilities. Such varied perspectives also reduce the overall impact of cognitive bias, as it is less likely teammates will share common preconceptions.

Cultivate (Thoughtful) Devil’s Advocates – Bad decisions are often the result of group members respecting each other. Yes, you read that correctly. Mutual respect reduces authentic dissent and increases the propensity for flawed decisions. If you have a natural cynic in your group, ensure that his or her voice is heard (to the extent it doesn’t become disruptive). If you lack a healthy dose of dissention, assign one or more people to aggressively challenge a proposed course of action.

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never tweet you about cupcakes or that killer burrito I just ate.

Image: Takao Umehara from the Noun Project

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Attention Startup Accelerators: Your Job Is Not Over After Demo Day http://johngreathouse.com/attention-startup-accelerators-your-job-is-not-over-after-demo-day/ http://johngreathouse.com/attention-startup-accelerators-your-job-is-not-over-after-demo-day/#comments Tue, 09 Jun 2015 12:00:24 +0000 http://johngreathouse.com/?p=5688 A version of this article previously appeared in Forbes. With top-ranked accelerators Lauchpad LA closing its doors and Y Combinator rebranding itself as a seed […]

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A version of this article previously appeared in Forbes.

With top-ranked accelerators Lauchpad LA closing its doors and Y Combinator rebranding itself as a seed fund, it seems fair to ask the question, “Are Accelerators Dead?”

Good news: a quick review of TechCrunch’s March 2015 List of Top 20 U.S. Accelerators, which includes two LA-based accelerators in the Top Ten (Mucker Lab and Amplify LA), proves that the overall health of the Accelerator landscape is sound.

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The TechCrunch team was judicious in its determination of qualifiers, insisting that the accelerators be, “fixed-term, cohort-based, with educational and mentorship components, culminating in a public pitch or demo day.” In addition, quantitative measurements included participants’ valuations, fundraising success, exit valuations and survival rates. Note: for purposes of this article, I am using the term “accelerator” to include incubators, startup labs and all other organizations geared to facilitating a startup’s early maturation.

Yet to be a truly effective accelerator, the work must continue the momentum beyond Demo Day. Obtaining funding is a key milestone, but equally important is helping fledgling companies build institutional mass once they leave the relatively safe confines of an accelerator.

To better understand how the accelerator world has matured beyond Demo Da, I sought out Jason Denenberg, former partner at Angel Capital Group, and current Director of Entrepreneurship at Launch Tennessee (LaunchTN). I previously wrote about LaunchTN’s second-phase master accelerator class called The TENN, which has a proven track record of helping startups thrive after graduation from an accelerator.

One member of the LaunchTN network of nine regional accelerators, ZeroTo510, in the Greater Memphis Accelerator Consortium, was listed in TechCrunch’s accelerator ranking. In addition, something interesting in happening in Tennessee, with the advent of hands-on venture firms like the Lamp Post Group and innovative ventures, such as PriceWaiter. My Forbes co-contributor Geri Stengel concurs that something is happening in the Volunteer State, writing last month about that state’s emerging women entrepreneurs.

In advance of LaunchTN’s flagship conference, 36|86, June 8-10 in Nashville, Jason shared with me the following three ways an accelerator should add value beyond demo day. Savvy entrepreneurs - seek out programs which incorporate these post-graduation activities.

  1. Convert Graduate-Founders Into Mentors

According to Jason, “Every experience is also a learning experience. Bringing an accelerators’ graduates back as mentors provides value to the next class, certainly. But to the graduates, it provides an opportunity to grow as leaders. It also provides a way for graduates to learn about ideas, opportunities and technologies about which they might not have been aware while focusing on building and scaling their own startup. This builds a strong alumni base; an element of significant importance to an accelerator’s value as well. If a mentorship seems like too large of a commitment, bring them back as a judge in the next cohort’s finale or demo day.

  1. Provide High Impact Exposure Beyond Your Hometown Press

One unique aspect of LaunchTN is that each master accelerator class is taken on investor and media tours of Silicon Valley and New York. Per Jason, “In some cases, media meetings and introductions don’t generate immediate results. However, by providing a simple note to a journalist, or sending an e-mail to the graduate with a writer’s contact information, the graduate’s funding announcement often garners exposure without much effort.”

Such was the case with Chattanooga-based Feetz, the self-described “digital cobbler” and graduate of The TENN. Feetz earned coverage in the Wall Street Journal following The TENN’s 2015 West Coast trip for their innovative 3D printed shoes.

  1. Adopt A “Whatever It Takes” Mentality

Accelerators should demonstrate (with actions, not just words) a “Whatever It Takes” mentality when it comes to helping graduates hit their post-demo day milestones. To this end, Jason noted that, “If a graduate needs a curated list of 55 development targets in a particular geographic area in order to get from a $1M revenue run rate to a $3M revenue run rate, we’ll provide it. If one of our TENN team companies needs legal advice to support negotiations with a large global brand, we’ll leverage our relationships, call in a favor or two and get it done.”

Although post-graduation support is key, Jason also made it clear that the ultimate responsibility for success lies with the startup team. In his words, “Following the demo day, startups must continue sell like there is no tomorrow to generate revenue and show traction in the marketplace. No program can work miracles. If the sales aren’t there, it might be time for the entrepreneurs to either pivot or seek out a new venture.” Even in the world of accelerators and post-demo day programs, some things never change. Just like in the “old days,” sales still solve all problems.

If you follow me on Twitter (@johngreathouse) I promise I’ll never tweet you about Santa Barbara surf conditions or tell you about that killer burrito I just ate.

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Your Startup Team Should Have Unlimited Vacation http://johngreathouse.com/your-startup-team-should-have-unlimited-vacation/ http://johngreathouse.com/your-startup-team-should-have-unlimited-vacation/#comments Mon, 01 Jun 2015 12:00:06 +0000 http://johngreathouse.com/?p=5674 A version of this article previously appeared in Forbes. It sounds crazy to offer unlimited vacation time to your startup employees. Something to the left […]

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A version of this article previously appeared in Forbes.

It sounds crazy to offer unlimited vacation time to your startup employees. Something to the left of socialism. Yet that is exactly what Richard Branson announced this past Fall. According to Branson, “We should focus on what people get done, not on how many hours or days worked. Just as we don’t have a nine-to-five policy, we don’t need a vacation policy.”

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They Wouldn’t Do That At RCA

It’s one thing when a wild-eyed billionaire like Richard Branson sings the praises of unlimited time off. It’s quite another when a pragmatic industry veteran like Jim Zarley echoes similar sentiments.

Jim spent nearly two decades at RCA before embarking on a serially successful Internet career, culminating in his long-time role as CEO and Chairman of ValueClick. He surprised me during a recent Local Market Launch Board meeting by suggesting that the company stop accruing vacation and allow employees to take as much time off as they need.

I was a bit shocked to learn that ValueClick implemented this seemingly radical policy during 2014. Yet Jim’s wise and reasoned support of the policy opened my mind to its advantages. In Jim’s words, “Our approach with our employees was, ‘If you get your job done, everything else takes care of itself.’” This enhancement of ValueClick’s benefits seems to have been well received by its employees, as evidenced by several positive references to the change on Glassdoor.

Eager to learn more, I had a sidebar conversation with Jim, in which he shared with me several advantages of not capping employees’ vacations, along with some cautionary advice for companies rolling out a similar policy.

Better, Not Worse – Employees are naturally skeptical whenever a major change is made to their benefits. ValueClick was proactive in assuring its team that this change was not intended to reduce their vacation, but to provide them with more flexibility and less stress should they unexpectedly need to take time away from work.

Historical Status Quo – All vacation which had accrued prior to the policy change remained in place and was paid whenever an employee left the organization, just as it would have been before the policy shift. The treatment of legacy vacation was a challenge for ValueClick to communicate properly, which prompted Mr. Zarley to note that, “The most challenging aspect of the change was the implementation. Thus, the earlier in the company's growth cycle unlimited vacation is granted is, the better.”

Company Benefit – Organizations which allow employees to take “as needed” time off, are not required to accrue the associated payroll liability, which increases the health of both their balance sheet and income statement. In addition, no lump sum payments need be made to employees because they have no “banked” vacation time due them upon their departure. Although this is certainly not the primary reason to implement an unlimited vacation policy, it is a real corporate benefit to be considered when evaluating a more liberal vacation policy.

Heads Up Required – Unlike Netflix, which does not force employees to obtain approval prior to taking time off, ValueClick asks employees to obtain such authorization. However, Jim noted that this approval requirement is not used to limit time off, but rather to ensure proper communication between employees and their managers which reduces potential disruptions during an employee’s absence.

Universally Applicable?

Most startups offer unlimited vacation time by default, as they lack the infrastructure, time and personnel to properly track employees’ vacation. More importantly, it is a moot point, as six-day work weeks are seldom conducive to taking extended Holidays.

For instance, when I joined Expertcity (creator or GoToMeeting, sold to Citrix) as one of its first business executives, the European Founder granted me three weeks’ vacation, citing the deplorable few holidays that most Americans take. The extra week of vacation proved to be nothing more than a nice gesture, as our team consisted of less than 10-people and we worked 6-days a week, including most major holidays, for nearly 18-months.

The irony was that we touted the extra week of vacation when recruiting talent, but none of the core team members took time off for a major hiatus, let alone an extended vacation. When we grew to about 50-employees, we began to make an effort to track vacation time, but our “policy” (though unwritten) was essentially the same as ValueClick’s – “If you need time off, take time off. If there is a risk you won’t meet your goals, shout and we’ll find the resources to help you.”

As Mr. Zarley noted, “If you hire the right people with a results-oriented work ethic, the amount of vacation time they take is irrelevant.”

Will Virgin Go All The Way?

It’s interesting to note that despite the broad attention Richard Branson’s comments received on the subject of unlimited vacations, only applying the policy a relatively small number of its employees (about 150).

In September of 2014, the infinite vacation policy for Virgin’s “parent company” was announced on its blog, along with the following promise: “Assuming it goes as well as expected, we will encourage all our subsidiaries to follow suit, which will be incredibly exciting to watch.” It will be interesting to see if Virgin goes all the way and tells all of its 50,000 employees, “take as much leave as you need.”

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never tweet you about my lack of vacation time or tell you about that killer burrito I just ate.

Image: Jonathan Daniel/Getty Images

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This Remote Working Experiment Failed And Succeeded – At The Same Time http://johngreathouse.com/this-remote-working-experiment-failed-and-succeeded-at-the-same-time/ http://johngreathouse.com/this-remote-working-experiment-failed-and-succeeded-at-the-same-time/#comments Tue, 26 May 2015 12:00:09 +0000 http://johngreathouse.com/?p=5669 A version of this article previously appeared in Forbes. Self-aware startups often learn more from their failures than from their success. Timehop, the photo album for […]

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A version of this article previously appeared in Forbes.

Self-aware startups often learn more from their failures than from their success. Timehop, the photo album for the digital age, is no exception. Created by Jonathan Wegener and his Co-Founder Benny Wong, the company has over 16M+ users. To put this in proper perspective, more than twice as many people access Timehop each day than read the New York Times.

And Then The CEO Said, “Go Home”

Timehop recently executed a radical experiment. With winter raging outside, it closed its NYC office for two weeks and made all of its employees work remotely, preferably not from their homes. Many of the employees took off for exotic, sun-drenched locales.

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Even though the experiment did not yield the results the management team expected, many of Timehop’s employees enjoyed the experience. For instance, Software Developer Kevin Steuer noted that, “Working remotely gives me more control over a concentrated blocks of time each day to code. This has been awesome for productivity.” Co-Founder Benny Wong echoed a similarly positive sentiment, saying, “No commute reduced a lot of the anxiety of running late, especially if I want to exercise in the morning.”

The experience was decidedly mixed, as an number of employees felt distracted and disconnected by the hiatus. According to iOS Developer Evan Coleman, “I’ve been struggling with separating work from relaxation. Since I’m already home, I can’t justify getting up from my laptop and relaxing. My logic is that I’m working from home, so when I’m home, I should be working.”

Developer Rajesh Shenoy felt that the great flexibility did not adequately offset the value of the casual social interactions experienced in an office setting. Per Rajesh, “I missed talking to everyone. Social interactions help take your mind off work for a bit and I believe helps prevent burnout.”

To dig deeper, I reached out to the company’s CEO, Jonathan Wegener. What follows is an excerpt of our conversation.

John Greathouse: You’ve just raised $10 million in funding, basically tripled your company headcount in a matter of months and you decide to kick everyone out of the office. What the heck?

Jonathan Wegener: Hah, yea, it sounds crazy. Back in December, I flew to Wisconsin to visit one of our remote employees. I worked out of his home for a few days and the experience was eye-opening. I was so much more productive and focused than I was in our noisy NYC office! But I also found it really hard to communicate and collaborate with the team back in NYC, even with the latest video and remote tools.

As a company, we always strive for better. The remote experiment was about capturing the best parts of remote -- focus and concentration, while improving the worst parts -- communication and collaboration. We saw a chance to improve the working habits of everyone, not just our remote folks.

We also knew that if we could improve things for our remote employees, we’d be able to hire folks from places like Wisconsin and everywhere else that talented folks live around the world. So we’d be widening the talent pool. And we could also potentially make "work from anywhere" an official job perk for everybody and build a truly flexible workplace. Plus, February in NYC is just terrible. <laughs>

Greathouse: How’d the team react to the idea?

Wegener: Most people were excited to book flights to warm places... but others were concerned about productivity or that we were turning into a company where everyone is just a head on a laptop. Our team is close knit and the idea of not seeing each other for two weeks made some folks sad.

Folks went to Orlando, Dallas, Denmark, Puerto Rico, the Dominican Republic, and someone even got a small studio in Venice Beach with views of the Pacific Ocean (and yes, I admit, that was me).

Greathouse: Was it a total free-for-all or did you had some ground rules? If so, what were they and what was your reasoning behind them?

Wegener: We established “Core Hours” of 1-5pm EST. Everyone needed to be online and available during those four hours. All meetings were scheduled during those hours which opened up the rest of the day, creating long stretches of uninterrupted work.

Outside of those core hours, when you worked was up to you. Work longer in the morning, work longer in the evening. Whatever you need to get the job done and be at your most productive. We also moved our weekly All Hands meeting to 1pm EST on Mondays and everyone conferenced in. It was kinda surreal to see all these faces from all around the world on your screen.

Greathouse: What were the immediate things you learned? I imagine such a shift exposed quite a bit very quickly.

Wegener: Within a couple days, we all noticed that our focus and concentration improved. But collaborative tasks became much more difficult. Meetings had more overhead to setup and were less productive. The team missed being around each other, and lack of facial and body language sometimes led to misunderstandings...

People who had fled to warmer places also found it distracting to rebuild their lives elsewhere -- finding a new place to buy groceries and toiletries, eat lunch, mail a package. Even finding reliable high-speed internet was difficult, especially for people who traveled internationally.

The people who stayed in NYC and worked from home really enjoyed it for a few days. Working from PJs without a commute freed up more time to work. But eventually folks got tired of it and wanted more work/life separation.

Greathouse: Let’s talk about some of those remote technologies. What were the tools your team uses to stay in sync?

Wegener: Slack is our office chat, and it works great. We used BlueJeans and Google Hangouts for video chat. Dropbox for design assets. Github for our engineers. We tried a few other more cutting edge tools like Sqwiggle and Screenhero but they didn’t stick.

We also setup ground rules for communication channels. For example, don’t @channel the team chat room in Slack unless there’s an important time-sensitive announcement -- it creates an obtrusive popup that interrupts 20 people across multiple time zones. That’s terribly distracting, and not something we had previously thought much about.

Greathouse: And besides the ‘product’ problems of technology still not being 100 percent ready for replacing day-to-day interactions, you mentioned some people problems that came out pretty early. Can you talk more about those?

Wegener: Remote work is skill that takes practice and requires a certain level of patience. Simple things like talking over a design sketch are much harder to do without a whiteboard. We also found that chat and text messaging leaves more room for misinterpretation which sometimes caused tension -- especially between employees who didn’t know each other very well. Apple has a mantra of “assume positive intent,” which means to assume people are always acting in the interest of the company or to improve something. We love this, and made it part of our value system as well.

Note: This concern was shared by Lead Architect Kevin Cantwell, who told me, “The longer I spend without in-person interaction my perception of individual signals like tone and body language dull. I'm less aware of the team's mood. Not having those small social queues make remote communication a bigger effort.”

Greathouse: So, knowing that remote working is a skill that must be developed, what were the lessons learned? Did you guys implement any changes?

Wegener: Ultimately, we decided we’re not setup to be a fully distributed team and we won’t be offering that as a perk.

Instead we’re doubling down on NYC as our home. If we find extremely talented remote employees who can’t relocate to NYC, we’ll consider that on a case-by-case basis, especially for people can get things done and are OK with occasional trips to our NYC office to bond with the team. We’ll also be buying some new equipment to improve audio and video for existing remote employees.

We’ve embraced occasional working from home which is great. It's interruption-free, productive, commute-less, and a welcome change once in a while. We've decided to create a silent library in our next office space for interruption-free work.

Overall, it didn’t have the outcome we anticipated, but we learned a ton and at the end of the day it’s made us a better place to work.

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never tweet about killer burritos or cuddly kittens.

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What The Heck Are My Startup Options Worth? http://johngreathouse.com/what-the-heck-are-my-startup-options-worth/ http://johngreathouse.com/what-the-heck-are-my-startup-options-worth/#comments Mon, 18 May 2015 12:00:09 +0000 http://johngreathouse.com/?p=5657 A version of this article previously appeared in Forbes. When joining a startup, there are seven important questions you should ask in order to answer […]

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A version of this article previously appeared in Forbes.

When joining a startup, there are seven important questions you should ask in order to answer the question: “What the heck are my stock options worth?”

You just received a job offer from a startup which includes 50,000 stock options. That is wonderful…or is it?

I reviewed and approved hundreds of employment offer letters at my various startups, all of which included stock option grants. The number of otherwise intelligent prospective employees who never ask relevant questions about their stock options was frankly shocking.

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Questions To Answers

I am sorry to disappoint the MBA crowd, but estimating the value of your startup stock options is not something you can do using the Black-Sholes option pricing model. In contrast, estimating the potential ultimate value of your startup options requires you to intimately understand the venture’s business model, the execution capabilities of the core team and the veracity of the company’s financial projections.

To this end, politely and persistently ask the following questions until you obtain enough information to estimate each of the variables in the formulas shown below. Answering these questions will allow you to reasonably estimate what your options may ultimately be worth.

1.     How many shares will I be granted?

The size of your initial option grant should be articulated in your Offer Letter, as well as in a separate Stock Option Agreement. In most cases, your shares will vest over a four-year period, with a one-year cliff. Under such an arrangement, if you leave your company within the first twelve months, for any reason, you will not vest any shares. Once you have completed your first anniversary of employment, vesting usually occurs on a monthly basis. Any vesting terms that do not conform to these standards should be challenged.

2.     What is the company’s total capitalization?

To help the CFO understand your request, indicate that you are seeking a “fully diluted” view of the company’s capitalization. Also, be sure that all “authorized” options are included, which will ensure that the capitalization figure includes granted and ungranted options.

3.     How many additional options will be authorized?

Authorized options include those which have not yet been granted. In order to calculate your potential future dilution, estimate the number of additional options that will be authorized and added to the option pool.

The size of a startup’s option pool will vary, depending on its maturation. However, the pool’s size, as a percentage of a company’s Total Capitalization, is generally between 15% and 20% at a company’s maturity. If an option pool is significantly below this range, it may be an indication of either; (i) a company that is stingy with its options, or (ii) significant future dilution may occur, once the option pool is increased to accommodate future option grants.

It is very common for companies to increase their option pool over time and a well-run company will manage a capital budget as a means of estimating its future option grants. As such, it is very reasonable to ask for an estimate of additional options to be authorized before the company’s exit.

4.     How many additional shares will be issued to investors?

As is the case with future options, a well-managed company can reasonably estimate the amount of investor capital it intends to raise in the future, along with an estimation of the valuation(s) at which such investment(s) will be made.

Future capital requirements are based on a variety of unknowable factors. However, it is imperative to understand the company’s underlying assumptions with respect to its future capital needs. A response of, “We have no idea,” is indicative of a company that is either: (i) poorly managed, or (ii) does not respect its prospective employees enough to provide them with a thoughtful response. Do not settle for a non-answer to this important question.

5.     How many options will I be granted in the future?

Clearly, the number of any additional options you will receive will be dependent on your tenure and performance. Some companies provide their employees with small options grants annually, usually in conjunction with either year-end or the employee’s anniversary hire date, while others seldom make such “refresh” grants.

6.     What is Management’s best estimate of the Company’s valuation upon an exit?

This variable is obviously an educated guess, at best. Even so, your prospective employer should be able to provide you with a valuation range that would be acceptable to the management team.

7.     What is the Exercise Price of my initial options?

This should also appear in your Offer Letter and Stock Option Agreement. Do not be satisfied with a response such as, “The exercise price will be defined by the Board of Directors, based on the Company’s Fair Market Value.” Ensure that your exercise price is defined in writing before you accept the position, even if it is subject to subsequent Board approval. Also, be sure you know the company’s latest 409A valuation.

Options Are Just That

Once you obtain the answers to the above question, you will have enough information solve the following four equations. At first glance, these formulas may appear complicated, however; the math is actually simple. To minimize potential confusion, the variables used multiple times are color-coded.

image001

I have been fortunate to work with great teams who were able to create enough value that our options were worth a significant amount of money. However, the reality is that many startups’ options are never worth anything. As such, consider any compensation derived from your options as an unexpected windfall. Working with kind, motivated and smart people who you will learn a great deal from is a far more important consideration than the potential value of your option grant.

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never tweet about killer burritos or pettable puppies.

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Why Selling To The Government Can Destroy Your Startup http://johngreathouse.com/why-selling-to-the-government-can-destroy-your-startup/ http://johngreathouse.com/why-selling-to-the-government-can-destroy-your-startup/#comments Mon, 11 May 2015 12:00:11 +0000 http://johngreathouse.com/?p=5649 A version of this article previously appeared on Forbes. The US Postal Service pulled off another debacle with the Maya Angelou stamp. Their task was […]

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Maya Angelou Forever Stamp Dedication

A version of this article previously appeared on Forbes.

The US Postal Service pulled off another debacle with the Maya Angelou stamp. Their task was simple. Combine a photo of Ms. Angelou with one of her more memorable verses. Instead, the coupled her image with text written by Joan Walsh Anglund.

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Twice Isn’t Charming

Hey, everyone makes a mistake. Surely this is an anomaly for the always-on-the-brink-of-insolvency US Postal Service (USPS). Sadly, this is not the case.

In 2010, as part of its “Forever” series, the USPS issued a stamp of the statue of liberty. However, rather than using the statue which has greeted immigrants to the US for nearly 135-years, the USPS erroneously used a photo of the cheesy replica which sits outside of the New York, New York hotel in Las Vegas.

After first denying it had made a mistake, the USPS was sued by the sculpture of the Vegas replica for copyright infringement. Oops.

Note: As a public service, I will happily offer the USPS a 15-minute course in “How To Use Google” at my special government rate of $150,000.

The Downside Of Government Contracting

The abundance of incompetence and the utter lack of accountability are just two reasons why startups should avoid selling to the government. Even in the USPS’s response, they took little ownership for their obvious error, stating “Had we known about this issue beforehand, we would have used one of [Ms. Angelous’] many other works.” In other words, “if we had known it was a mistake, we wouldn’t have done it.” Wow. This childish response in the private sector would almost certainly precede an employee’s brisk walk to the door with their belongings in a box.

An entrepreneur’s two most valuable assets are time and money. Government prospects abundantly waste both, by negatively impacting a startup’s cash flows while causing it to spend unnecessary time participating in laborious approval processes and elongated sales cycles. Note: I use the term government herein as a matter of convenience to apply to all forms of municipal organizations; city, county, state and federal.

Other reasons startups should avoid engaging selling to the government include:

Vendor Approval Process – In many instances, governments require companies to abide by arduous vetting processes in order to become an "approved" vendor. In the case of the US Federal Government, the requirements of the Government Services Administration can take years and a small fortune to fulfill – time and money most startups simply cannot afford.

Slooooooow Mover – Given the typical government worker’s lack of accountability, the typical government procurement embodies no sense of urgency. Rather, the purchasing process is generally lengthy and requires vendors to commit significant time and resources, with no certainty that they will derive a single dollar for their efforts. Approved vendors are then required to complete cumbersome Requests For Proposals. These voluminous documents should generally be avoided by startups, as most young companies do not have the internal resources or the luxury of time required to succeed in a multi-vendor bakeoff.

Successful startup selling is largely predicated on velocity. Thus, startups should Go For The No; quickly determine which prospects are most likely to purchase in the near term and focus your venture’s energy on delivering near-term prospects an awesome experience. Unfortunately, governments seldom do anything quickly, including telling a startup, “No.”

Slooooooow Payer – The government is a notoriously slow payer. Officially, the Prompt Payment Act requires the US government to pay its vendors in 30-days “after receipt and acceptance of material and/or services.” In actuality, payments routinely extend beyond this threshold, with 120-days outstanding not uncommon.

When the US government announced the 2009 Cash For Clunkers stimulus plan, it promised dealers they would receive payment “within 10-days.” Unfortunately, the majority of the government’s payments were not submitted until months after the dealers had paid for the used cars they purchased on the government’s behalf. Even when the government has good intentions, it is difficult for it to act in a timely manner. Good intentions will not pay your light bill.

Capricious – Non-government customers sometimes make irrational decisions that are difficult to predict; government customers do so on a routine basis. As the decision makers come and go with the latest election cycle, a startup can lose a government account for no reason other than the newly elected officials want to give a hearty "thank you" to a company that greased the skids for them during the election. In addition, government budgets are prone to draconian, across-the-board cuts which often have no correlation to the efficacy of specific programs or vendors’ solutions. It is frustrating to lose an account to a formidable competitor. It is downright criminal to lose a hard-fought sale because of crony capitalism.

Set Asides – Despite the controls bureaucrats create to ensure a fair procurement process, it is any but. Most startups do not have the financial wherewithal to make adequate campaign contributions to purchase government set-asides or win no-bid contracts. In most cases, startups are “set aside” to make room for big companies, when it comes to obtaining lucrative government contracts.

Bro Factor – An inherent advantage startups enjoy is the Bro Factor, as it is difficult to create intimate, personal relationships with dispassionate, detached workers.

Mitigating Downside – Unlike the private sector, in which many buyers are focused on gaining a competitive advantage, the fear of loss is often the primary criteria motivating politicians and their appointees. As such, optimizing your company’s value proposition to satisfy the government’s low-risk threshold might result in a sub-optimal solution in the commercial arena.

High Volume / Low Margin – The combination of the low profitability of competitive bid contracts, the large size of many government procurements, and extended payment terms can be deadly for a fledging startup.

The Tyranny Of Low Expectations – Post sale, governments are typically undemanding customers, due to their “lack of accountability” culture. In contrast, aggressive private sector customers help a startup improve its value proposition with frank criticism, product roadmap suggestions and new use cases.

A Middle Ground

Some startups avoid some of the pitfalls of selling to the government by partnering with larger companies which have pre-established relationships with government customers. In the parlance of government contracting, this approach is termed a “prime and sub-prime relationship.”

Although this approach mitigates the negative impact on a startup’s time and money, it requires the sub-prime startup to surrender a significant portion of their margin. In addition, prime contractors often jealously guard their relationship with the government buyer, which confounds the startup’s efforts to graduate from sub-prime to prime status.

Lethargy Can Be Your Friend

Many of the factors which make governments disadvantageous startup customers also act as competitive barriers, once a relationship is established. As your company grows, it might make sense to seek government contacts, for the following reasons:

Barrier To Entry – Once you are in with a government entity, the same inertia which made it difficult for you to secure the sale will make it similarly challenging for your competitors to displace you. All too often, government programs continue in perpetuity, as do many of the procurement contracts which underlie these never-ending initiatives. An existing relationship also facilitates selling additional goods and services by simply amending your previously approved government contract.

Low Default Risk – Unless you are selling to Greece, Mozambique or California, the risk that you will never get paid is relatively low. The relatively slight default rate risk facilitates factoring such receivables, thereby accelerating a startup’s cash inflows.

Budget Drain – Government workers are trained to drain their budgets annually, to avoid being granted a smaller budget in the following year. Approved vendors who enjoy an existing relationship with the government can leverage this inclination to waste money at the end of each fiscal year by pre-selling additional products and services. If the government cannot take delivery of such items by the end of their fiscal year, you can negotiate an upfront payment, which allows the bureaucrats to fully expend their budget while providing you with guaranteed future revenue and interest-free financing.

Although government customers are not without their merits, startups should only target such bureaucracies when they can obtain a market price and avoid an extended and costly sales process. By focusing on commercial enterprises that share your venture’s sense of urgency and profit motive, your startup can maintain its solvency and avoid getting caught up in the government’s next outrageous mistake.

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never tweet you about politics or that killer burrito I just ate.

Image: Leigh Vogel / WireImage

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Every Entrepreneur Has A Bob Dylan Moment – What’s Yours? http://johngreathouse.com/every-entrepreneur-has-a-bob-dylan-moment-whats-yours/ http://johngreathouse.com/every-entrepreneur-has-a-bob-dylan-moment-whats-yours/#comments Mon, 04 May 2015 12:00:34 +0000 http://johngreathouse.com/?p=5641 A version of this article previously appeared in Forbes. Young Al Kooper did not miss his Bob Dylan moment. When Al was invited by Producer […]

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Opening  Of The Rock And Roll Hall Of Fame And Museum

A version of this article previously appeared in Forbes.

Young Al Kooper did not miss his Bob Dylan moment. When Al was invited by Producer Tom Wilson to sit in on Dylan’s Highway 61 Revisited, Mr. Wilson made it clear to Al that he was a backup guitarist. He told him to sit quietly in the control booth and be ready to play if Dylan wanted to explore an arrangement that required two guitars.

According to Al, “Me being twenty one years of age and very ambitious… I decided I was going to play on that session.” However, it was quickly evident to Al that his services wouldn’t be needed, as Dylan’s primary guitarist was Mike Bloomfield, a more experienced and proficient musician.

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You Don’t Have To Beg Forgiveness, If You Get It Right

After several hours of waiting patiently, Al saw his chance. In his words, “They moved the organ player over to piano. So I said to Tom Wilson, ‘Why don’t you let me play the organ? I have a great part for this,’ which was total bull$hit. Tom Wilson said, ‘Ah man, you don’t play the organ.’ And just then, someone came in and got him to take a phone call. So he didn’t say, ‘No.’”

When Mr. Wilson left to take his call, Al rushed into the studio and sat down at the organ. The rest of the band assumed he was sent in by Wilson and that he actually knew the song they were about to record, which he did not.

Mr. Kooper picks up the story once Wilson returned to the control room, not realizing that he was at the organ. “Tom Wilson, (said) ‘This is take 7. Hey! What are you doing in there?’ Then you hear me laughing…” Before Wilson could say anything else, the “snare shot heard round the world” sounded and Kooper laid down one of the most iconic organ solos of the 1960’s. Per Kooper, “And that was it. That was the beginning of my career. Right then and there.”

The track was Like A Rolling Stone, which became Bob Dylan’s biggest selling song as was voted by Rolling Stone Magazine in 2011 as the Best Song Of All Time.

The fact that Al did not know the song resulted in one of the most distinctive elements of his performance. His playing is an eighth of a beat behind the rest of the band, because he was watching the chords Bloomfield was about to play. Kooper knew that he was taking a huge chance and that his margin for error was zero, given the aggressive way in which he had interjected himself into the session.

Despite having little experience on the organ, the song’s success caused Kooper to become one of the most sought after keyboardist during the next decade. He played on hundreds of albums, including those by: The Rolling Stones, B. B. King, The Who, The Jimi Hendrix Experience and Cream.

My Dylan Moment

Sadly, I have never sat in on a Dylan session. However, like all entrepreneurs, I’ve had multiple versions of my own Dylan Moments.

For instance, when I joined Computer Motion (NASDAQ: RBOT, merged with Intuitive Surgical), their immediate need was for a CFO. Even though I had passed the CPA exam, I had no desire to be an accountant, just as Al Kooper did not aspire to be an organ player. However, my career objectives aside, Computer Motion needed a CFO to help them raise money, so I took the role without hesitation.

Admittedly, I was not an all-star CFO. However, I was fortunate to recruit a fantastic finance team, which included people I worked with for over a decade, at multiple companies. With strong support, I was good enough to do the job.

My excellent financial team freed me to excel in the areas of my core strength: generating revenue. Although the title was not widely used at the time, I was essentially a CRO, traveling the world selling medical robots while we awaited FDA clearance. I was also instrumental in taking the company public, which provided me with a solid experiential foundation upon which I built the remainder of my startup career.

Luck Well Executed 

"The best wrestler is not he who has learned thoroughly all the tricks and twists of the art, which are seldom met with in actual wrestling, but he who has well and carefully trained himself in one or two of them, and watches keenly for an opportunity of practicing them." --- Seneca, Roman Philosopher

Luck, in part, entails preparation meeting opportunity. However, luck never arises absent the courage to execute flawlessly in the face of potential failure. If you do not seize your Dylan moments, you risk living a life of untested preparation and missed opportunities.

Many people allow their luck to unwittingly pass them by because they are driven by fear of loss, which paralyzes their ability to seize the moment. In contrast, successful entrepreneurs are driven by fear of losing out. They weigh an opportunity’s risks and rewards and when the chance for gain appears to be greater than the potential pain, they go for it.

I shudder to think where my career would have ended up if I had said, “No” to my Dylan Moment. Don’t say “No” to yours.

This article was inspired by a conversation with my friend and mentor.

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never Tweet about that killer burrito I just ate - just startup stuff.

Image Credit: Kevin Mazur/WireImage

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How Tony Hawk And The Bones Brigade Broke The Rules & Owned The Market http://johngreathouse.com/how-tony-hawk-and-the-bones-brigade-broke-the-rules-owned-the-market/ http://johngreathouse.com/how-tony-hawk-and-the-bones-brigade-broke-the-rules-owned-the-market/#comments Wed, 29 Apr 2015 12:00:24 +0000 http://johngreathouse.com/?p=5632 A version of this article previously appeared in Forbes. In this second installment of my conversation with George Powell, Founder and President of Skate One, […]

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image001

A version of this article previously appeared in Forbes.

In this second installment of my conversation with George Powell, Founder and President of Skate One, he describes how Tony Hawk and the other members of the Bones Brigade revolutionized skateboarding and made it cool again, after its near death in the late-1980’s. He also shares his frank thoughts regarding his long-standing relationship with Stacy Peralta.

Skate One is now the world’s largest skateboard company, with best-selling brands such as Powell•Peralta Skateboards, BONES Wheels and Mini•Logo Skateboards.

You can read part one of our discussion here, which covers a number of insightful topics, including the origin of Skate One and George’s multi-decade partnership with Stacy Peralta.

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In the late 1970’s, George partnered with Stacy Peralta, who at the time was a 20-year old world champion skateboarder. Together they created The Bones Brigade skateboard team which launched the careers of not only Tony Hawk, but many of skateboarding’s other stars, including: Alan Gelfand, Mike McGill, Steve Caballero, Rodney Mullen, Lance Mountain, Tommy Guerrero and Kevin Harris.

John Greathouse: How did the Bones Brigade come together?

George Powell: This is Stacy’s (Peralta) fault entirely! He handpicked all the skaters, determining who was going to be the best of the young, just emerging amateurs, and bonded them together into a team we called the Bones Brigade. The key for him was to NOT steal well known skaters from other companies, but to start over completely with a new crew of unknown skaters, to make it fresh and inspiring. Using unknown skaters in his unique ads made them even more interesting.

You and Stacy parted ways in the early 1990’s and then re-united almost 20-years later. What led to this hiatus?

By the early 1990’s, our successful partnership was being used against us. WE were successful, and BIG, one of what the smaller companies called, the BIG 5 (PP, Tracker, NHS, Thrasher, Vision). They felt we were so big and so successful that they could not compete with us, so a skater named Steve Rocco, formed a coalition of skaters to start their own company or join his, and wrest the industry away from what we had built, for themselves.

This turned out to coincide with the switch from Vert (vertical) skating to Street skating, a change we had orchestrated ourselves, to expand the industry, and those top skaters like Tony Hawk, Lance Mountain, Tommy Guerrero, Mike McGill, Mike Vallely and Rodney Mullen, all saw opportunities to leave our team, and start their own brands, in order to stay relevant, and run their own company, which they did.

Stacy and I disagreed on how to handle this. He wanted us to create a brand for each guy and let them go on their own, just manufacturing decks and wheels for them.  I did not think that the economic model Stacy wanted us to use would work, and we would just use up all our resources launching a brand for each of these guys, and loose the margin that paid for the marketing to keep us at the top.  I was for fighting to keep our leadership roll, and as much of our team intact as possible.

Stacy was broken hearted, because he loved his team, and wanted them to have what he had achieved. My refusal to do this caused him to give up on our partnership and the industry entirely. He picked up his skate film-making career and took it to Hollywood. This estranged us for more than a decade.

Over time, I think we both saw that it was silly to be ignoring each other and I reached out to Stacy to at least reestablish communication and attempt to resolve the hurt feelings we both had. Over a period of a few years, we gradually spent more and more time together again, and his interest in the skate industry and our legacy partnership, which had by this time evolved into Legend status, began to draw us back together again. His films Dogtown & The Bones Brigade: a documentary have both reforged relationships within the industry, and partially healed old disagreements that time has clarified, between the Bones Brigade team, he and me.

Doing the BB doc was a real ice breaker for all of us, and I think it was the real beginning of our reforming of a partnership to promote skateboarding again. Today, Stacy works with us between his commercial projects to create films that showcase our skaters, brands, and skateboarding. As time continues, I think the impression that we were both probably better when we worked together than when we worked alone, will keep us doing fun projects together going forward.

Greathouse: That’s cool that you and Stacy are working together again. How has your history together impacted your relative roles at Skate One?

Powell: Stacy and I are both creative people that function best when allowed to focus on what we do best. At this time, I have the luxury of an incredible staff, who are better than me at handling our company’s day to day responsibilities, allowing me to focus on product development and graphics, my strong points.

When we initially worked together, I had to abandon my R&D roll, in order to run our madly growing company. Stacy was more or less free to focus on marketing and team promotion, but this dual roll used up a lot of time that kept him from focusing on his filming and marketing. Now, we are both more experienced in our rolls, and freed up to do what we do best, with a great group of friends at Skate One to support our efforts. I expect this more mature level of focus and separation to enable our new partnership to proceed forward even more forcefully than it did 30 years ago.

Greathouse: You started working with Tony Hawk when he was 14. Was it clear at that young age that he would become the most recognizable face of the sport? If so, what made him standout?

Powell: When he first came on the team, he was exceptional, and very driven, so we recognized that he was going to be successful, but neither of us would guess that he and Rodney would become the trick creators and innovators that they both became. They are both so creative, driven, and sensitive. It was a pleasure to work with them both, even though they both went through some very rough times as they matured and became skate stars. These issues are examined in much more intimate detail in the BB Documentary, and provide fascinating insight into the stress of adolescence and growing up as sensitive, driven, young star athletes, in a world that discounted their skill and incredible creativity as childish folly and a waste of time.

Greathouse: Is it true you once issued Tony a royalty check for .85 cents?

Powell: Yes, that’s how bad things got in the 1980-1983 dark ages period, when we were hanging on like the picture of the cat clinging to the bar by its claws.

Greathouse: There was tension among your executives that these ‘kids’ were making so much money. How did you deal with this and keep the company rowing in the same direction?

Powell: It was hard for us to see a 12 year old kid join the team and a few years later, after we had given them tons of equipment, clothing, love, travel expenses, and guidance, suddenly make more money than any of the people who were supporting them at the time, and without whom they could not have risen to the level they did.

Nonetheless, it was equitable, necessary and appropriate in the light of what professional athletes make, or movie stars make, but is it fair? Who is to say.  I did have trouble rationalizing it with our management team, for sure it was a tough sell, but we made it. Who is to say what’s fair. Why should the union longshoremen on the west coast make more than twice as much as police, or teachers?

Greathouse: It seems that Lance Mountain had an attitude that my students could learn from – he consistently showed up ready to do whatever was required. Even though he might not have been the most talented skater, he made himself a valuable member of the team.

Powell: I think that point is best covered by what Lance says himself in Stacy’s BB doc. He did what no one else wanted to do, look like a dork, and not always just show himself making great tricks. He provided the comic relief, and in return, he got the extra publicity that endeared him to millions of young skaters who were inspired to play around like Lance did in the films, and feel good about themselves. He was an enabler supreme. In retrospect, he brought in more customers than Tony did. Tony impressed, but Lance provided an on ramp into skateboarding for everyone else. This was an example of Stacy’s genius.

Greathouse: If you had a do-over with your entrepreneurial career, what is/are one or more mistakes you would like to avoid?

Powell: What! Who me make mistakes? <pauses> Let me count the ways.

1. Do not listen to what your competitors say about you or your company. Create your vision and hold to your plan to achieve it. Understand that in today’s global business environment, those who would like to have what you are perceived to have will lie, cheat, and steal anything they can from you, and rationalize it as just business. As I was finishing college, my father use to say, business is a jungle son, and I laughed at him, smugly knowing he was being over dramatic and out of date…sadly, I was wrong. Human nature has not changed at all, and there are now even more ways for others to steal from you and/or assassinate your character or company.

2. Do not allow yourself to be put on the defensive, or rerouted from your plan in order to address a perceived insult, lie or problem. Just like the Islamic State terrorists try to provoke us by doing thing’s so outrageous that we are manipulated into reacting to them, instead of working our long term plan to defeat them on our own schedule and way. The way you win is to get to the finish line first and/or with the best product and marketing. If you allow yourself to get distracted, you will fall behind.

3. Be continuously vigilant in guarding against the natural arrogance, conceit and infallibility that comes with the smallest success. Be constantly cautious and wary of your ego.

4. Never assume that tomorrow will be like today or yesterday. When things are going really well, and you are succeeding beyond your initial expectation, it is easy and convenient to think that this will go on forever, and your growth curve is unstoppable. BEWARE! Life is not a constant up or down curve, but goes in cycles. Look for them and use them like a hill or a wave.

5. Be VERY cautious of over reaching financially, when you can, based on the above foibles. Consider “what if” scenarios to account for the normal business and economic cycles that will surely affect your future.

6. Follow the advice in Zero to One, by Peter Thiel as best you can. I found this book embodies much of the lessons I’ve learned over the past 50 years in one little book. It is a nice distillation of smart strategies and tactics. 

7. Persevere! There are cycles, up and down. When things go south in the economy or your company or your industry, don’t quit and look for greener pastures. Here is where your love of what you do, and belief in its integrity come in to reward you, for only your love of what you are doing will motivate you to keep going, endure the pain and loss that will happen at these times. So just put your head down, go into survival mode if you have to, so you will be there, plugging away at what you love and believe in, when the tide turns and it is your time again. You will be in place, ready to go, with a head start. I suppose I should temper this advice with the caveat not to believe in the typewriter, when computer word processors arrive, but I’m sure you get my meaning and will not become ostriches with your head stuck in the sand.

Greathouse: What advice do you have for students who are looking to combine their passions with a startup career?

Powell: Do so! Do not plan a career in a field you are not passionate about. Do not just think of making money. Think about making insanely great products, services, or whatever your passion is. Never settle for being a “me too” company. Strive to be the leader, the innovator, the best. Follow your heart. Life goes by pretty fast (warp 9.0 at my age), so don’t settle for less than being the best you can be at what you do. Word.

Greathouse: How do you think the future of skating will differ from the past decade?

Powell: Skateboarding has undergone a number of cycles; decade long economic cycles, sociological cycles, cultural cycles, and maturity cycles. While this is not the place for a long treaty on the essential nature of skateboarding and its evolution, I believe we are embarking on a brand new cycle, the likes of which we have not seen since 1975. A forty year cycle.

Each of skating’s major cycles have involved a new generation coming into the realm, in order to experience it and reinvent it for themselves, after the previous generation has taken it as far as their vision permitted, and stalled. We are at the most dramatic “reset” I have seen in 40 years! It is very exciting to me because we have transitioned in just a couple of years from a mono focus activity to a multi focus culture that is embracing diversity of age, style, and intensity. It is very healthy right now, and this is giving us the opportunity to address each of these new centers of interest and activity with new insanely great products!

Greathouse: I know your passion is product development. Can you give us a hint as to what you are currently working on?

Powell: Ha! Well, as you can probably tell, I’m a big fan of Steve Jobs, and he learned the lessons I’ve mentioned to you earlier than I did, but I’ve learned them. I will give you this general information, though.

Our future products will employ new materials not found in today’s skateboards, and will be designed for all the facets of skate culture and terrain. We will be redeveloping each skate component to optimize it for each intended use. The skateboard is a very efficient transportation tool, and recognizing this, we will be making it even easier and more fun to ride, carry, and use. Our R&D budget is as big as we can possibly make it. Everything we make goes back into new products. We are the current leader in polyurethane wheels, and quality bearings, and aim to be the best in trucks and decks too. We are very excited about this opportunity to reinvent ourselves as the sport reinvents itself.

You can read part one of my interview with Mr. Powell here.

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never tweet you about politics or that killer burrito I just ate.

Image: Courtesy of George Powell

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PR Is A Passion Play That Cannot Be Outsourced http://johngreathouse.com/pr-is-a-passion-play-that-cannot-be-outsourced/ http://johngreathouse.com/pr-is-a-passion-play-that-cannot-be-outsourced/#comments Mon, 20 Apr 2015 12:00:53 +0000 http://johngreathouse.com/?p=5621 A version of this article previously appeared in the Wall Street Journal. You have been planning to ask your long-time partner to marry you for […]

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France Frozen Proposal

A version of this article previously appeared in the Wall Street Journal.

You have been planning to ask your long-time partner to marry you for months and the big day has finally arrived. In order to reduce your risk of failure, you ask your roommate, who has proposed to several times previously, to pop the question on your behalf.

Sound crazy? This is the approach many startups take when they communicate their story to the market. Rather than directly explaining their value proposition with all the passion and heartfelt stridency that only an entrepreneur can deliver, they outsource this communication to a Public Relations (PR) firm. PR agencies are expensive versions of Cyrano de Bergerac. Their best attempts to woo the media will never equal your ability to sing your own praises.

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Keep the Passion In-House

In addition to passion, any function at your startup that involves iterative learning and/or close proximity to your customers should be performed in house. Beyond PR, such roles include: Sales, Product Development, Strategic Planning and Fund Raising.

There are a number of reasons why it makes sense for a startup to not outsource PR in its early days, including:

PR Is Sales - Have you ever met a successful, yet dispassionate, salesperson? Thought not. PR is not order-taking. It involves persuading jaded media gatekeepers that your venture’s story is compelling enough to warrant their audience’s valuable mindshare.

Most journalists have been burned by wantrapreneurs who did not let the facts get in the way of a good PR story. Thus, without trust, the media gatekeepers will not risk their hard-won reputations promoting your venture. People buy from people they like and trust. Journalists are no exception.

Morphing Message - During the early stages of your venture, your value proposition, and thus your messaging, will be fluid, as you assess the market’s reaction to your evolving story. This reality makes it especially difficult for a dispassionate, third party to promote your story. It also causes an inefficient relationship, as you spend much of your time with your PR firm simply updating them on the latest tweak of your story.

You Are Not Really The Client - A PR agency’s true allegiance is not to you. Rather, it lies with the journalists with whom they work with on a daily basis. If a journalist rejects a particular client’s story, an agency will not risk its relationship with the writer by aggressively countering the rejection. An in-house PR person is not hampered by such media allegiances and will thus launch an aggressive campaign to ensure that your story is heard.

As depicted in the following schematic, a PR agency will readily sacrifice a relationship with a client before it will risk damaging a valued gatekeeper relationship. New clients are much easier to obtain than industry connections, which can take years to cultivate.

image002

Your initial in-house PR personnel should be a relatively junior person who will execute your straightforward strategy – to economically gain as much market validation as possible. The best person to carry out this mission is a “doer” who will roll up their shirtsleeves and hit the phones. This person should have many of the same characteristics of a good salesperson: be verbally engaging, charming and doggedly persistent. They will sell your story to a variety of media outlets, so they must be able to craft a compelling yet believable story to fit the various journalists’ biases and interests.

The Shill Game - Another reason in-house personnel can be more effective than hired guns is that PR agencies are often viewed by journalists with a jaundiced eye. Given that they are paid to get their clients media coverage, their credibility may be specious. Even when they are genuinely excited about a particular client’s solution, it may be difficult for them to convince journalists of the sincerity of their excitement.

This phenomenon is aptly described by Christopher Locke, one of the authors of The Cluetrain Manifesto. Christopher came to PR from the engineering world and thus was not tainted by the industry’s rampant hucksterism. Working for a small software company, he discovered that something interesting occurred when he abandoned the company’s talking points. According to Christopher:

“Something amazing happened. As soon as I stopped strategizing how to ‘get ink’… as soon as I stopped seeing journalists as a source of free advertising … I started having genuine conversations with genuine people.”

“Then something even more amazing happened. The company started ‘getting ink.’ Lots of it … in places like The New York Times, The Wall Street Journal and Business Week.”

What Christopher discovered is that real conversations in the PR world are rare. Thus, his genuine enthusiasm and willingness to engage journalists in non-agenda-driven dialogs was infectious. He effectively bro’ed up with the otherwise jaded journalists, just by being genuine and real in a world in which such behavior is rare.

Right Time, Right Place

Clearly, as your company matures and your story stabilizes, it can be appropriate to work with a third-party PR firm. Your messaging might lose some of its inherent passion, but the trade-off will be corporate communications that are more strategic and methodical.

However, in the early stages of your venture’s journey, it is unwise outsource your promotional pleas, just as it would be foolish to ask a friend to propose to your significant other on your behalf.

Ultimately, at a startup, PR does not stand for “Public Relations.” Rather, it translates into “Passionate Relationships” and passion can never be outsourced.

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never tweet about killer burritos or cuddly kittens.

Image: AP Photo/Francois Mori

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