Tag Archives: entrepreneur

May 01

Stumped on Stocks & Options?!

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Regularly I am asked about stocks & options.  Entrepreneurs have sent me their equity packages to look over for a “sniff test” & first time entrepreneurs ask for general information about stocks & options.  Depending on the specific situation I usually point them in the direction of David Weekly’s “An Introduction to Stock & Options for the Tech Entrepreneur or Startup Employee”.  This overview does a great job of simplifying & clarifying what stocks & options mean.  If you haven’t read it & are at all questioning stocks & options, I recommend checking it out.  In the meantime, here are some things from the intro that I’d like to point out & elaborate on:

The Board.  ”Most people don’t realize this but shareholders are, legally, at the top of the totem pole.”  The Board is appointed to serve the Shareholders, but the Shareholders have a right to change the Board at anytime.

In other words, the CEO is not the boss.  If you own a share in a business you are the CEO’s boss’s boss.

The Board must receive notice of a board meeting at least 48 hours in advance.  Remember, a majority of Board members (aka quorum) must be in attendance (either in person or via phone/Skype/etc).

Equity.  “ownership in a company”

A cap table is used to organize & track who owns what.  Advice to entrepreneurs:  KEEP THIS CLEAN.  Update it whenever there is a change, make it legible, & keep in mind when raising money that all investing parties will need to be accounted for in the cap table.  You’ll thank yourself for keeping this updated regularly, as opposed to waiting until the day before your company is acquired to go back in time & get the cap table up to speed.

Dilution.  ”reduction in ownership”.  A touchy subject for many entrepreneurs.  No one wants to own less of her/his baby.  Keep in mind CEOs…no investor wants you to own so little of the company that you are not motivated to make the company a huge success.  The investors’ interests (should be) aligned with yours.  They want a return on their investment too!

Common vs. Preferred Stock.  Preferred Stock are “shares that grant special rights”.  Those rights vary depending on the investor, investment round, & other factors.  Examples of Preferred Stock are Series A, Series B, Series B-2.  Series Seed shares are also considered Preferred Stock.  We are seeing more & more Series Seed shares issued.

Weekly also discusses types of investors – angels, VCs, & a bit about how venture firms work.  One thing he mentions that I want to point out & comment on is that Associates/Analysts/JuniorVCs will call you sounding really excited about your company, but if no partner is involved in the discussions it is not worth your time.  That’s only half true.  True – all deals need to eventually get to the partners’ desks.  However, a way to get there is through the Associate/Analyst/JuniorVC.  You’ll have better luck getting a phone call with a Junior VC than a partner her or himself,

Oh & on that note…Junior VCs aren’t stupid.  Don’t try to be their friend & then only call them when you want a meeting with a  partner.  That fakeness shines right through & reflects on you as an entrepreneur & a person.

On that subject, Weekly also brings up the typical “weekly Partner Meeting” that most VC firms have.  True story.  If a VC brings you to pitch to partners at a Partner Meeting that’s great.  For smaller VC firms, not all pitches in front of the partners are made at the Partner Meeting.  In fact, rarely do we have entrepreneurs actually come pitch during our Partner Meeting.  We schedule other times during the week instead.  I imagine that may not be the case for larger VC firms with many partners who are all on different travel schedules.

Raising money?  Have a term sheet?  That’s not the end.  Once you sign a term sheet there is a “closing process” & the VC will continue to do some “due diligence” while things are getting legalized.  Once “closing documents” are prepared & signatures in place, then the money is wired (by 1 pm Pacific Time ideally).  So no, a signed term sheet does not mean you have cash in your bank account the next day.  It’s only the beginning of another process.

Going to work for a startup?  Here’s what to expect…

A vesting schedule with cliff.  No that does not mean that you are put on the edge of the cliff with a life or death scenario.  Vesting is done so the employee earns stock purchase rights over time (typically a 4 year period).  That vesting doesn’t start until a “cliff” is reached (generally 1 year), which means the employee won’t start to vest any purchase rights until she/he has been employed for one year.  Vesting gets you the right to purchase stock…you still have to exercise options to purchase though!

Read Weekly’s “STRATEGIES & PITFALLS” section.  It covers Alternative Minimum Tax, filing an 83(b)…must knows if you have stock purchase rights!

Any specific questions?  Ask in the comments or send me an email.

Venture on,

MEL aka Venture Gal

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Apr 26

Jeff Williams, a Serial Entrepreneur in Michigan

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Jeff Williams

Jeff Williams

Our final class for ES569 at the Ross School of Business invited entrepreneurial rockstar Jeff Williams to talk to the class about his story.  Jeff has built several life sciences companies & led 1 company through an IPO & sold 2 for hundreds of millions of dollars.  Some of the advice he gave to the students:

  • Stick to your mission statement.  Keep it broad enough so you can tweak things if need be (e.g. product may look different than initially thought)
  • Pick a large & rapidly growing market.  This means there is opportunity for new entrants & VCs invest in companies with multi billion dollar opportunities.  Plus, in growing markets you can capture growth instead of relying on solely stealing share.
  • Identify a significant opportunity in that market.  Have a deep understanding of the market so you know how you’re going to enter.  Form a plan describing how you’re profitably going to exploit the opportunity.  Strategically think about how the product will get you to revenue.
  • Basis for a strong business model = low cost product/service & high margins!
  • Know what the technology is good at & not good at, but don’t become enamored by it.
  • Strategic partnerships are grey area.  Pursue them so you can see if they will meet the needs of the company.  Make sure to know the tradeoffs & what you want to get out of the partnerships (e.g. cash, distribution, credibility)
  • “You can’t have too much money” especially if you’re a first time CEO.  You’re always going to need more money than you think you need.
  • Investors won’t squeeze you to very little ownership because they want you to be motivated by the potential to make a lot of money.
  • “Build best team you can as soon as possible”.  Sometimes building the best team means replacing yourself.
  • Match business strategy with financial pro forma.  Really think through drivers of business. what will increase gross margin?
  • Stuff always goes wrong.  Learn from it.
  • Resource allocation becomes priority when you get to 10-15 people & you can’t do everything yourself.  Get out of the weeds & focus on the bigger picture as the company grows.
  • Implementation is more important than strategy.
  • “VCs don’t owe you anything.”  No entrepreneur pitching deserves money.  Once you raise money all that matters is results.
  • Do your homework.  When raising money, research the VCs.
  • When is the right time to sell?  When you’re a VC funded company, you’re always for sale.
  • Companies fail when you don’t think about the business model, competitive advantages for the long term, & when the technology isn’t reasonable.  Always be on the lookout for what you should be focused on because so many things can go wrong.

Since Jeff has been successful he was brought on to run companies (& make them successful).  He has a reputable track record & in the words of Tom Porter (& according to many) “The way you have the most power is to be successful”  

Venture on,

MEL aka Venture Gal

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Apr 16

You are what you measure. Lessons from Larry Freed, CEO of ForeSee Results

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Image representing ForeSee Results as depicted...

Larry's company ForeSee Results (Image via CrunchBase)

“You can’t manage what you don’t measure.  You can’t improve what you don’t measure.  What you measure will determine what you do”

The words of wisdom from Larry Freed, CEO of ForeSee Results.  Larry came & spoke at one of our “Managing the Growth of New Ventures” classes a couple weeks ago.  He shared a lot of great advice & recommendations based on what he has learned.  Including:

  • “To be successful, you need to do two things: 1. Satisfy customers, & 2. Be fiscally responsible.“
  • Most KPIs are wrong.  Just because you can measure it doesn’t mean it’s a KPI. For instance, conversion rate, task completion isn’t always a success.
  • “Behavior tells you what happened.  Satisfaction tells you what will happen.”
  • “More data isn’t necessarily better.  Better data is better.”
  • Today there is “The Super Consumer”.  The Super Consumer can reach the company / has a voice…for instance can complain about the company via Twitter.  TSC listens, is smart, & can clone themselves (e.g. multiple browser tables or have Amazon running on phone with price comparisons when walking through BestBuy).  It used to be that companies knew more about the products than consumers did, but now that’s not the case.  Consumers can do research, pull information up on phones, & use social media to complain.
  • “We’re collecting more & more data because we don’t know what to do with data we have”
  • “Customer experience is all relevant to expectations” (for instance, going to Blimpy Burger, which is known for not so great service, versus the Chop House, a fine dining restaurant).  Experience & expectations define satisfaction.  Satisfaction determines what consumers do next & drives financial success.
  • Big 3 Customer Experience Questions(to think about when analyzing data):
    • How are we doing? (key drivers, performance)
    • What should we do? (areas of focus defined by impacts to help figure out where to allocate resources)
    • Why should we do it? (what’s payback of making improvement)
  • “Sometimes it looks like companies are looking to raise money, not make money”
  • “Measure satisfaction of each touch point because that’s actionable”
  • “Don’t put all your eggs in one basket.  Diversify your customer base”
  • Set the tone by leading by example.  For instance, he gets on calls with customers & sits in on meetings when analysts deliver reports.
  • One of the biggest challenges for a leader is delegating.  Early on you are used to doing everything & when you grow you have to delegate.  Be careful about adding layer of management
  • Early stage metrics to track: CASH FLOW & burn, revenue growth, customer growth, renewal, sales pipeline.
  • Mid stage metrics: CASH FLOW, revenue growth, profitability growth, gross margin, bookings growth, diversification (customer & industry), renewal (customers & $ amount), pipeline (opportunities in, closed, lost, bookings, meetings, activity).  Success metrics at this stage are: Sales & Marketing efficiency, MRR, CAC, Months to recover CAC, Average revenue per customer, CLV, benchmarking metrics.
  • Great thing if you can get other people to sell your product.
  • “Everybody wants to feel good about what they do, but you need to talk about the bad”

After Larry spoke to the class, the lecture shared Qualities of Good Metrics:

  • Clarity (easy to understand & communicate to the company. the simpler the better)
  • Utility (actionable info obtained quickly & easily. what am I going to do if I know this. how will it lead to better use of time & money)
  • Timely & Forward (useful for planning future needs & actions)
  • Adds Insight (helps use learn more about our business model)
  • Overall (give you what you need to update your board, banker, & employees each month. have a language that says you understand your business model & you are constantly looking ahead)

What are you measuring?

Venture on,

MEL aka Venture Gal

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Mar 28

ES569: Jan Garfinkle, Arboretum Ventures Founder & Managing Director

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Healthcare investing is great because beyond the possibility of generating significant returns, the companies invested in save lives & really impact people.  Yes, there are huge risks.  Huge risk, huge reward.  At this week’s class, Jan Garfinkle, Founder & Managing Director of Arboretum Ventures spoke to the class.  Jan started her career as an engineer & in 2002 founded Arboretum Ventures.  The firm celebrates its 10th birthday this year & has successfully raised 3 funds.

Jan focused her discussion on financing companies, answering common questions that entrepreneurs ask:

How does an entrepreneur figure out how much money the company needs?

  • Start with a budget.  VCs want to know what is the most important thing the company must do to increase its value (aka a milestone) & how much money will it take to reach that milestone.

How to decide which source of funds to pursue?

Consider

  • Cost. What are the cost of the funds you raise (i.e. cost in terms of ownership)?
  • Flexibility. What level of decision making responsibility do you want?
  • Supply. Where is capital available?
  • Entrepreneur’s goals long term. Do you want to build a lifestyle business that you can work at for the rest of your life?
  • Type of business.  Not all businesses are venture hackable.

What are sources of capital?

  • Yourself
  • Grants (government, foundations, universities)
  • Debt (customers, bank, venture debt)
  • Equity (friends & families & fools, angels, VC, IPO)

What do VCs look for?

A great jockey, riding a great horse, in a huge race.  In other words, a great entrepreneur, commercializing a great product, in a huge market.  Jan, like many VCs I know, prefers an A team & B product, over a B team & A product.

What do VCs do when they due diligence?

Try to learn as much as possible about tit!

  • Management
    • Track record
    • Relevant experience
    • Highly motivated
    • Honest & ethical (how are decisions made? how does the team communicate?)
    • Make sure you can recruit the right people
  • Financials & exit potential
    • capital requirements
    • exit price & timing
    • talk to strategic corporations to understand what they need to see in order to be interested in buying the company (*we at RPM don’t do this well)
  • Product need
  • Market size
  • Time to market
  • Competitive positioning
    • existing technologies
    • emerging technologies
    • IP

Material company provides & how long it takes to get the materials to the VC are indicators of how the entrepreneur will be like to work with.

What is the best way to get VCs’ attention?

Get a warm introduction/referral!

In addition to the insights Jan shared in response to those particular questions, she also shared a few notable quotables:

  • “Your career will not be a straight line. Be flexible”
  • “If it’s a great exit, every body wins. Even the janitor if he got shares”
  • “The more touch points you’ve had as problems the more successful you’re be as a CEO”
Selecting investment opportunities & selecting funders involves building relationships.  Getting to know each other.  Building trust.  Even if you are a great jockey, with a fast horse, in a huge race, if the investor doesn’t trust you, or you don’t trust the investor – that’s not a good way to start an investor/entrepreneur relationship.

Way to go Jan!  Keep up the great work & Venture On,

MEL aka Venture Gal

Mar 22

ES569: People and Culture featuring Serial Entrepreneur Josh Pokempner

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Tuesday night’s class focused on People & Culture, the most important part of any organization (in my opinion).  Our guest speaker was Josh Pokempner, serial entrepreneur & founder of several successful companies.  Below are some of my raw notes for that night’s discussion with Josh:

  • Business is trying to control circumstances so intended results happen.  my response:  life is trying to control circumstances to intended results happen.
  • we can’t control how well a product does, but we can control our corporate culture.
  • how to create that great culture?
    • servant leadership
      • rich person = someone so in love with what they do, so much they can’t wait to get out of bed to do it. can’t wait for alarm to go off so you can get out of bed. my response: what is it that i can’t wait for? what is it that makes me wish my alarm will go off?!
    • create & practice a shared mission, vision & values
    • “5 ways of being”
  • book recommendation: “Man’s Search for Meaning” – achieve happiness by dedicating yourself to someone or something.
  • “there’s a soul to a company” – JP
  • “In this business you have to be comfortable with bumpy flights” – JP on the life of an entrepreneur

After Josh shared his stories & wisdom, students asked some thought provoking questions.  Some that were especially thought provoking for me include:

  • How do you balance sharing information with your company & sharing information that scares people? (for instance, the company is low on cash, & you don’t want to scare people into thinking they’ll be cut)
    • Josh recommended “Just tell them”
    • In my own experiences an open book culture is a powerful way to get the team to take ownership & better know how they can impact the success of the business.  People cannot act in the best interests of the company when they don’t know what those interests are.  Being honest & open beats little to no transparency.  Be authentic. Don’t unpleasantly surprise your team & they won’t unpleasantly surprise you
  • For companies early on, low on resources, how do you build a fun team environment?
    • My thoughts: So you don’t have cash to take your entire team to Cedar Point, how do you still incorporate fun team activities (if that’s part of your culture)…do it within your means.  You don’t have to spend a ton of money (or any at all) to build culture through activities.  Going to a park & playing frisbee will cost you the price of the frisbee.  At Iorio’s we do team bonding activities when times are flush & when times are less cash rich.  It doesn’t matter.  Be creative & find a way to make it work.
  • How did you find the people you hired?
    • Josh brought in people he had worked with before.
    • If you don’t have that luxury & you’re starting for the first time, or you need to hire more people than you have previous colleagues, remember this – building your culture starts with your job posting & application.  What do I mean by this?  The language of your job posting & application sets a tone.  If you are a fun & creative company, make your job description & application fun & creative.  This is the best way to attract talent aligned with your culture & give you a great pool of candidates to hire from.

After Josh finished speaking, the discussion about culture & people continued.  A few nuggets of wisdom to share:

  • “Culture is based on 99% of what the CEO does & 1% on what he says” – Fry
  • “Culture is the single most important factor in recruiting & retaining key employees” – Fry
  • “Employee behavior consistent with the culture should be recognized” – Fry
  • CEO plans culture, lives it, reinforces it, manages it, tracks & measures it, modifies as needed
  • “Personnel selection is decisive. People are our most valuable capital” – Joseph Stalin
  • “as leadership changes, the effectiveness of people may also change”

And some questions that were asked:

  • Should vision statement be about 1 product (if company only has 1 product) or something bigger?
    • Tony thinks it should be bigger
    • I think a vision is big.  Your core vision for your company is that north star…what are you reaching for.  For instance, Disney’s vision is to “make people happy”.  At Iorio’s our vision is to “deliver sweetness”.  These visions are big & broad.  I have found it helpful to also write “vision statements” that may reflect more tangible, shorter & longer term visions for specific aspects of the company.  A vision statement that is written out could be short term focused & looking out at 1 year from now & that may only include 1 product.  I recommend writing vision statements when launching a new product, taking on a new initiative, starting a new company etc…answer questions like “what does this product/company look like?” “how do our customers respond?” “what are the challenges we are overcoming?”  paint a picture of the future.  Put yourself in the future.  A vision statement should be written as if you are in the future.  For more visioning tips I recommend reading some of Ari Weinzweig’s tips on visioning. I, and many others, have learned from him.
  • What do you think comes first, the culture or the people?
    • Tom mentioned that half the people he meets that start companies don’t think about the culture, even if, as an investor, he hints at its importance.
    • I think culture is an iterative process, especially early on.  Like product iteration.  Create culture consciously. Bring on people that align with that culture, learn from them & team dynamics, iterate culture consciously, bring on more people. Rinse & repeat.

Bottom line: Create culture consciously & continually.  All this talk about culture in class has me enthused about learning more & sharing more about what I’ve learned about culture.  What questions do you have?  What would you like to learn about culture & people?

Venture on,

MEL aka Venture Gal

Mar 15

Growing Companies – Culture & Leadership Featuring Serial Entrepreneur Jennifer Baird

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This week our class hosted our first guest speaker for the semester.  Jen Baird, serial entrepreneur, currently CEO of Accio Energy & former founder & CEO of Accuri Cytometers.

Jen got her interest in being an entrepreneur when interning for a VC firm.  After graduating from the University of Michigan with a psychology degree & from Kellogg School of Management with her MBA, she worked in consulting for over half a dozen years.  After consulting she took the leap into carving her own path, a route that was quite challenging for her.  When she co-founded Accuri Cytometers she was at the start of a 5 year journey creating, launching & scaling a product & team.  She grew the company from 2 to 80 employees, raised close to $30M in capital, launched a European subsidiary, & approached profitability.  Jen claims to really excel at is the people part of the organization (which I would argue is the most important part!).  She claims “companies are built of people.  They are the building blocks”.  This makes sense given her psychology degree & operational experience building & leading teams.  She clearly has learned a lot from her experiences.

What really stood out to me about Jen is that she knows herself well, exudes passion, is very personable, & is quite confident.  In particular, this is what I learned from listening to Jen & reflecting on her discussion:

“Power of focus is what you choose NOT to do”

On any given day my to do list could be pages long, but really do I need to be doing all those things?  Where is my time best spent?  I have been attuned to this lately & the way Jen described “choosing NOT to do something” caught my attention as a different way of thinking about prioritization.  Another piece of advice she had was to check in every 6 months to see what else can be delegated or eliminated.  Otherwise I become a restraint (similar to how I felt at Iorio’s – stifling our growth).

There are aspects of us that are similar.

Jen’s open style of management mirrors my open book philosophy & values based management style.  A few things we both advocate: all hands meetings, open door policy, building trust & communication.  She also mentioned that she likes to share details & has learned that sometimes it’s better to not share too much.  Something I’m working on also.

I still have questions I’d like to ask Jen, & I will ask her:

  • How do you decide which business opportunities to pursue?  Why Accuri?
  • Challenges you faced as female? How did you overcome them?
  • Where do you learn? (books, people, etc)

Following Jen’s talk Tom discussed management styles.  The key thing I took away after this lecture is that knowing who you are you are is a continual process/discovery that never ends.  In particular he asked: Who are you?  What is your impact on people?  What are your values?  What does success look like for you?  We need to figure out who we are.  It is hard enough to be ourselves, let alone someone else.  If we don’t know who we are it’s difficult to hire people around us to make us better.  Tom recommended developing a vision for yourself.  Know what you’re good at & what you’re not good at.  How best to do this?  I’m still figuring that out.  I do know that spending time with myself, in silence, thinking & reflecting has helped me.

He also emphasized the importance of trust.  To earn the trust of others (e.g. board of directors, customers, employees) you must first trust yourself.  If you don’t trust yourself, it will show, & others won’t trust you.  A great book I read that goes into detail about trust is “The Speed of Trust” by Stephen M.R. Covey.

We also questioned “what is the role of the CEO?”  50-75% of the time she/he is working with people. From time to time GreatLakesVC shares his Weisdom with me & he once told me that the job of a CEO is to make everyone else better at what they do.  To achieve the most in a resource constrained organization, the CEO should be controlling about the company vision & values because every employee should know the story of the company & exactly what the company is trying to accomplish.  The danger of being controlling is slowing down progress & not empowering people to the fullest.  The more someone wants control, the more things need to go through that person, & it slows things down (exhibit ME/Iorio’s).  It is really important to get the message right for the first people you hire & make the culture & values clear.  This way, when you stop hiring people, the people who are hiring people get the message right & hire based on the culture & values of the company.  Recently at Iorio’s we saw a great example of congruency without our organization.  One of our team members created a series of “Iorio’s Ten Commandments” to be a way to share the ground rules & operations of the business.  The result – a set of guidelines that scream Iorio’s culture as we created it.  The fact that we didn’t write them…& that they are so spot on to our culture & values is a huge testament to our ability to create congruency in our business.

Eccellente!

Venture on,

MEL aka Venture Gal

Mar 08

Has your company outgrown you? Or have you outgrown your company?

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It’s that time of year when I run errands in the morning, eat dinner in my car, & spend more time at the University than I do at my house…that’s right…it’s the second half of Winter Semester at the University of Michigan (UofM).  During this time, both partners at RPM Ventures teach classes at the UofM.  Marc’s class, “Venture Business Development”, is taught through the Center for Entrepreneurship at the College of Engineering.  It’s a two week intensive course where students work on teams to evaluate a real business idea – everything from developing an elevator pitch, to rapid prototyping, & talking with customers.

Tony’s class “Managing the Growth of New Ventures” is taught through the Ross School of Business to second year MBA students.  This course takes place once per week for half a semester and is co-taught by Tom Porter.  This year is my second year involved with this course & my role is basically the person who does whatever needs to get done to be helpful.  I found articles for course readings, grade homework, track participation, take attendance, & brainstorm ways to improve the course for future sessions.

This week’s class included introductions and a roadmap for the course, as well as a discussion about the five stages of business growth.

  1. Existence
  2. Survival
  3. Success
  4. Take Off
  5. Maturity

The class focuses mostly on the first four stages, building a company from absolutely nothing to a company and navigating the stages of growth along the way.  There is so much more than building product when building a company.  Building team is equally if not more important.  Team, culture, strategy, are the less glamorized aspects of starting a business, but so important.  In this first class I pulled away a couple reflections:

Know Thyself & Discover Wealth

As a leader of a company, being able to be reflective & introspective about your role with the company is very important.  In light of my recent unplugging & reflecting on so many things in my life, this is especially relevant.  During quiet time to thing about life, interests, passions, I learned a lot.  In an organization, for a CEO or leader, it’s important to take that time to pause & reflect on what you’re doing from a high level & ask yourself “am I the right person to be doing this or could someone else do it better?”, “would I be better suited somewhere else in the organization?” “would I add more value somewhere else in the organization?” because someone who may be great at creating and figuring out if something works may not be the same person who takes it from 10 employees to 50 or 50 to 100 and scale the business into the next stages of growth.  Think of companies where the CEO/Founder has been the same throughout all stages…it’s very few…Mark Zuckerberg, Steve Jobs, Michael Dell.  Being abel to figure that out as a leader is very important.

When thinking about a leadership role in a growing company, I think there are two aspects to consider:

  1. Role, in terms of what functions you are  best at doing.  Where do you add the most value?  Where do you thrive?  Is it the operational details, making sure money is the bank, paychecks are sent out, wheels are turning day to day. Or are you more strategic, thinking about where the company is, where it’s going.  Are you great at graphic design? etc.
  2. Stage.  What stage of growth is your paradise?  What time during the company do you want to be there?  When the company is 3 people with an idea & lots of ambiguity?  or when the company has 100 people with more developed systems & lots of names & faces to remember?  Holding your role constant, if you’re doing the same role in a 10 person company, it’s going to be different (even in that same role) than in a 100 person company.

I don’t think you need to figure out one before the other.  For me, I’m still trying to figure out what the function is optimal for me & even more broadly, what industry, general space interests me most.  What’s the space? What makes me tick?  Now I have several interests in broad areas & am exploring them further to discover what really could be right for me.

In terms of stage, I like the early stuff…the ambiguity, figuring things out, the creation, having a blank canvas.  I’m energized by a small team, setting the culture, & taking on the start of something with big plans. in a small team.

Transitioning Leadership

Another thing that came up when discussing the 5 stages of growth was this idea of transitioning from each stage, when you need to transition leadership.  Let’s say a leader isn’t a right fit in a company that is going from Survival to Success & that leader could better be replaced by someone else to lead the company, & the original leader could be better off somewhere else in the company (with a different role perhaps).  For the original leader it’s tough to make this transition…this is his/her baby, his/her creation. It’s very difficult.  I’ve experienced this personally with Iorio’s.  Just two weeks ago was the first time handing the reins over to someone else to run Iorio’s Gelateria in Ann Arbor.  I think our delay in transitioning leadership has limited our growth because things are funneled to go through few people & there’s not breakup of decision making at a higher level.  My biggest challenge & opportunity is preparing transitions so the company can successfully operate without the presence of the founders & early leaders.  The first experiment for this went well. Transitioning leadership also illustrates the importance of hiring people & building a team of people you trust.  It makes it a smoother transition if you trust the person you’re transitioning to.

I have also seen this play out in RPM Ventures‘ portfolio.  In particular, there is a company where the CEO is doing a lot of operational/day to day things that maybe he doesn’t have to bother himself with. If he brings in someone else, he can step into a more strategic role, which is what he loves & is really good at.  For instance, he could spend more time on things like product, vision, & leading the team in that direction.

Transitioning leadership is a common thing for companies.  Though not just high tech, as Iorio’s is a great low tech example, it is prevalent in high tech as well.

What does this all mean?

When starting a company, think about how you are going to work yourself out of a job.  How do you develop a company, build a culture, put systems in place, that will exist without you?

Sometimes the best thing you can do is pull yourself out of your company, or take yourself out of your current role, & do something else.

Have you ever transitioned leadership in your company?  What did you learn?  Do you think your company is ready for a transition?  Is your current leadership team holding your company back?  I’d really like to hear about your experiences!

Venture On,

MEL aka Venture Gal

Feb 10

If I Didn’t Run a Business…

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A couple weeks ago I hit an edge…it was a day in which everything seemed to be pulling against me.  The day included needing to replace our iPad POS because it was dropped & shattered, someone not showing up to work on time (a big deal with a brick & mortar store), my car dying, my nose bleeding, leading to cancellations of meetings & surviving off trail mix all day.  It was the universe’s way of telling me to breath. Sometimes I go, go, go until I break.  Or have a wakeup call of sorts.

Since, I made some changes & am making more time to reflect…at least an hour a day.  On one my reflections I started thinking about all of the things I want to do & things I would do if I didn’t run a business.  Here are some things that came up:

  • own a dog
  • go to my friends’ concert with Snoop Dog (the night I was reflecting on this happened to be the night I was missing their concert)
  • volunteer
  • exercise more
  • read & write everyday
  • sleep more
  • create improv videos
  • travel more
  • try new things
  • cook more & develop more of my own recipes
  • finish writing my book
  • spend more time with friends & family

Reviewing that list in my head I realized that these are all things that I CAN do while running a business.  It all comes down to time management.  How am I spending my time.  How am I not spending my time.  How am I making the most effective use of my time without coming out of balance & reaching my “breaking point.”

I also listed things that running a business allows me to do, including:

  • meet new people
  • lead
  • create
  • inspire
  • learn
  • experiment
  • impact peoples’ lives
  • make money
  • develop an expertise
  • invest in myself
  • travel
  • try new things

Examining this list it becomes clear that there are lots of other ways to accomplish these things.  These are all things I can do without running a business.  What does this mean?  Being an entrepreneur isn’t a “job”.  It’s a “lifestyle”.  Running a business is not easy.  Consider your objectives.  If you want to “be your own boss” or “control your schedule” think again, as these are not necessarily true of running a business.  Consider aligning your interests with your business objectives.  Then these two lists become one: what you are doing.

Venture on,

MEL aka Venture Gal

Jan 17

The Energy Flair Story: From Flair to Finish

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RIP Energy Flair

At the end of 2011 Energy Flair was officially shut down.  Here’s the story:

A couple years ago I was brainstorming ways to solve the problem of too much energy use. And I’m talking unnecessary energy use…like using a less energy efficient light bulb, or having electronics plugged in sucking up phantom power when no one is actually using what is plugged in.

Inspiration came when shopping with my dad at Menards.  He was looking for more light bulbs, so I went & grabbed some compact fluorescent light (CFL) bulbs (way more energy efficient than incandescent).  He looked at the CFL bulbs, noted the price difference from the incandescent, & opted for the cheaper incandescent bulbs (even after my spiel about time value of money & saving money from lower electric bills, in the long run).  At that time, a light bulb went on in my head! (haha pun intended)

The light bulb – maybe people need an additional incentive to take actions that reduce their energy consumption.  Maybe “savings in the long run” wasn’t enough.  Initially I thought a service like Recycle Bank, which rewards people for recycling with coupons & discounts, would be perfect for energy….reward people for using less energy!

This was 2009 – I was attending the University of Michigan & was a regular entrepreneurial event attendee.  I went to a Mingle N Match event to share my idea for “Energy Bank” – an online service to reward people for using less energy.  At the Mingle I met Rajesh – my future business partner.

Rajesh & I met regularly, usually at the business school, & ended up titling our company “Carbon Perks”.  We did usability studies, consumer research, market research, putting together mock ups, entering business plan competitions, talking to potential customers, & then some.  We had the cutest logo too – a flower that resembled an electric plug.  Clever – yes.  Thanks to a talented student/graphic designer for that one!

We raised a couple thousand dollars through all the business plan competitions, grants, & other programs available to students.  We also applied to Momentum (basically the TechStars / YCombinator of Michigan).  After a couple intense interviews & trips to Grand Rapids, we were accepted & we decided to enroll & move out to Grand Rapids for the summer after graduating from UofM.

Early on we learned valuable lessons, including:

  1. There was a negative connotation with the word “Carbon”.  Carbon Perks’ name had to change.
  2. Real rewards just weren’t economical.  We did analysis to discover that we probably wouldn’t be able to cover the cost of providing real rewards that were meaningful or inspiration.
  3. People were motivated by virtual badges on some new (at the time) mobile app called Foursquare.  People were shoving each other to become Mayor of their favorite local spot (okay maybe that’s an exaggeration, but people were pretty serious about it).

As a result of this, we changed our name to TerraPerks & decided to call our service Energy Flair – where people could earn virtual flair (aka buttons) by using energy more efficiently.  They could share & compare their flair with friends via Facebook, adding an element of social pressure & gamification to the whole thing.

For more on Energy Flair, check out coverage on the company at MLive, Earth Techling, MichEEN, & YouTube.

A Sampling of Energy Flair

We continued speaking & meeting with a lot of potential customers & learning everything we could about utilities, working with utilities, consumer behavior, behavioral psychology, & beyond.  About midway through the summer we had learned some more critical findings:

  1. Utilities are slow moving.
  2. We couldn’t move fast enough.  Not being able to hack away at something ourselves really impacted the speed at which our iterations happened.
  3. Jennifer Aniston did not answer her phone when we called.  (If you’ve seen the movie “Office Space”, you may have an idea why we would be calling her.  If not, watch this scene from the movie & you’ll figure it out)

We “pivoted” our model so our revenue did not depend on utilities.  We explored other business model options & continued to learn & grow.  We developed partnerships with energy affiliated organizations, attended energy efficiency seminars, developed a lot of educational content, & made regular updates to our site.  We even did a program for students at an elementary school in Ann Arbor.  The kids learned a lot & had fun doing so (we led a “beer less pong” game for the students at their big school event).  We received some revenue after adjusting our business model.

EnergyFlair.com Screenshot

After the summer I made the decision to leave working with Energy Flair full time.  I said I’d still be involved in a much lesser role & help where I could with introductions, talking through some challenges, & brainstorming solutions to problems.  There wasn’t enough evidence for me to keep forward at a full+ time pace.   Rajesh stayed on to work on Energy Flair & learned even more since that time.

About a month or so ago Rajesh & I had the conversation.  The conversation when we decided to officially shut down Energy Flair.

Why? 

  1. Team.  Rajesh was working on Energy Flair full time, alone.  After I left working on Energy Flair full time, I’d chat with Rajesh from time to time to touch base & take action depending on what I could do to help.  We didn’t have the people on board to really make this sustainable.
  2. Traction.  It didn’t go viral.  Oops.  Lesson – just because you build a cool thing that you think is awesome & everyone should use, & you add in features to build in “virility”, doesn’t mean it will go viral!  We didn’t figure out the model on a per unit scale…& as a weis (intentionally spelled wrong) person once told me – “optimize first, scale later”.  We didn’t try to go big before figuring out the unit economics.
  3. Tender.  Aka Money.  An important factor when building a business.  It may not be as important at first, when you’re figuring things out & have low personal expenses.  At some point it is more needed though.

What did I learn?

A lot!  Some of the highlights which inform my current & future endeavors:

  1. People.  Make sure you have the right people on the bus.
  2. Product – be able to build it yourself.  Hiring an outside consultant, firm, or freelancer to build your product for you does a few things:  a. slows you down. If you can’t build the product yourself, you can’t always iterate is quickly, something that is important at an early stage when first trying to figure things out.
  3. Customer feedback.  Listen to it, but filter appropriately.  We spoke with dozens of electric utilities, users, auditors, utility consultants, & other relevant parties, & a lot of what they said was supportive of our proposal.
  4. Long sales cycles suck.  Selling something to anyone who takes a year & a day to decide which brand of water to buy for the staff lounge is not an ideal situation.  Utilities are slow movers.  When we “pivoted” (I put pivoted in “” because I think it’s an overused term…but at least people know what it means) away from selling to utilities it definitely saved us from the waiting game.
  5. Make it easy.  Minimize friction on your site.  Don’t make users think.  If your grandparents can navigate the site without your help, you’re golden.
  6. It’s easy to start a company.  It’s easy to shut down a company.  It’s challenging to build a company.

Failure?  No.  There are no mistakes, only gifts.  I learned a lot from the experience & don’t regret it.  I’m smarter for it & will be even better next time around!

Venture on (& go turn off your lights =),

MEL aka Venture Gal


Jan 04

“I was blind, but now I see”

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Happy 2012!

Before the end of 2011 I read “I Was Blind, But Now I See” by James Altucher.  I received the book as part of the swag bag I got at the Defrag Conference in November (awesome conference by the way, I highly recommend attending!)  I met Altucher at the Defrag Conference, the day before it began.  He’s a really nice guy.  Someone I would want to have deep conversations with & go to yoga class.  His perspective on life is refreshing.  He challenges “norms” (what is normal anyways?) & has strong opinions.  His opinions may be challenged as being extreme or unrealistic, but he backs them up with reasoning, which can flip anyone’s conventional thinking on its head.  His presentation at Defrag was awesome too!  I learned a lot from this book.  Altucher shares his experiences & reflections which I think are helpful for anyone who is seeking fulfillment.  The two key actionable takeaways I got out of the book are:

1.  Question every thing I do & the intentions behind them.

2.  Put on my oxygen mask first.

and though I’m not one to make traditional New Year’s resolutions (to me, each day is the start of a new year) I continually make goals for myself & experiment with new ways of living & thinking.  I’m making these two points mantras for living over the next month or so, see how it goes, & I’ll come out of it with either a fresh way of looking at my life or a decision that I don’t want to look at life that way.  Either way, I will learn a lot.

I took notes on the rest of his book, which you can read here.

 My questions for Altucher,

  • What if it’s part of your job to judge people?
  • Regarding, acting like the dumbest person in the room – I find there’s an added complication here if you’re female & young, & often times it is already assumed by others in the room that you are the dumbest person in the room.  What do you suggest in this case?

All in all, I highly recommend this book.  It’s a quick, fun read with so much tangible wisdom & stories to share.  I also recommend following James Altucher on Twitter / reading his blog because he shares a lot of thought provoking & practical advice on there as well.  Disclaimer:  James Altucher did not pay me to write this post.  Nor did he even ask me to write it.  This was my decision.  Putting my oxygen mask on first =)

Venture on,

MEL aka Venture Gal