Earlier this month I discussed key tactics for startups to raise seed funding at a meetup sponsored by LB Tech. Here are the slides from my presentation. They’re provide a simple checklist of issues a startup needs to address when putting together an early stage funding round.
SoCalTech broke the news today that CapLinked, my new startup, closed its seed financing round earlier this month. From their post:
Los Angeles-based CapLinked, an online startup developing software to help link entrepreneurs with their investors, has raised $350,000 in an equity investment round, according to a regulatory filing by the firm today. CapLinked’s software helps entrepreneurs manage the information they give to their investors, including tracking milestones and documents, storing and exchanging documents, and handle to-do lists for building a business and managing funding efforts. The firm’s CEO and co-founder is Eric M. Jackson, who was a very early employee at PayPal, where he helped bootstrap marketing and early formation of the firm…
I’m also pleased to announce that CapLinked’s beta service is ready to launch, and we will begin sending out invitations over the next few weeks. If you’re interested in participating in our beta program, sign up here.
Sports offer many useful analogies for entrepreneurship. We talk about “moving the ball down the field” to visualize how entrepreneurs try to maintain forward progress even when the going gets difficult for their startups. Investments are often classified as a single, double, or home run when referencing a venture capitalist’s investment model. Since starting this blog last year, I’ve used sports as themes for a couple of posts, including Michael Jordan’s disturbing motivation and what Tiger Woods’ meltdown teaches about handling a crisis.
With the Los Angeles Lakers squaring off against the Boston Celtics in the NBA Finals tonight, I feel it’s an appropriate time to explore a topic that’s been on my mind for a while: what entrepreneurs can learn from Lakers’ head coach Phil Jackson.
A member of the Basketball Hall of Fame, Phil Jackson coached the Chicago Bulls from 1989-1998 and the Lakers since 1999. Jackson led his teams to a record 10 championships—the most ever for a head coach in any professional sport—and owns the mark for the most playoff game victories in NBA history. Along the way, Jackson has coached some of the most talented (Jordan, Kobe Bryant, Shaquille O’Neal, Scottie Pippen) and mercurial (Dennis Rodman, Ron Artest) players in league history.
Jackson is a colorful and often controversial figure. He uses the media to pick fights with opposing players and sometimes even to chastise his own personnel. He’s nicknamed the “Zen master” for his holistic and spiritual approach to coaching. At the start of each season, he personally selects a book for each player on the team and hands out to him at the start of training camp. He has admitted to using experimental drugs in his youthful counterculture days. And recently he came under fire for refusing to criticize Arizona’s tough new illegal immigration law.
Whatever his quirks, Jackson knows how to win and get the most out of his team. As I’ve watched him coach the Lakers over the past decade, I’ve grown to appreciate many of his coaching tactics and even incorporate some of them into my own management style.
Here are a few of Jackson’s traits that entrepreneurs would do well to emulate:
1) Let Your Superstars Shine
Recruiting “Grade A” talent to your startup is critical. But talent alone is not enough; Jackson adroitly finds a way to wring maximum productivity out of his stars while implementing a system that allows all of his players to contribute. Before Jackson turned around a Lakers team that struggled in 2005-2007 and rebuilt them into a champion in 2009, critics charged that anyone could have won multiple titles with the players he’s coached. Jackson has coached some amazing players, especially Jordan and Bryant, who are among the best ever to play the game. But having superstar players on the roster isn’t enough to guarantee excellence. Consider how LeBron James, who along with 3 former All-Star teammates (Mo Williams, Antawn Jamison, and Shaq), went down to defeat early in this year’s playoffs.*
Talent isn’t enough. No enterprise can get far without fully leveraging the skills of its personnel, and this doesn’t happen by chance. It happens when an organization’s leaders value excellence and give exceptional people a chance to shine. As I detailed in The PayPal Wars, PayPal’s COO David Sacks gave his producers (i.e. product managers) a lot of autonomy and responsibility. As the name implied, producers were expected to produce results, and Sacks also made sure they got credit for their successes. High achievers were welcome throughout the company, a fact proven by the achievements of the so-called PayPal Mafia, and the company weathered incredible challenges as a result.
2) Implement a Flexible System
While still an assistant coach, Jackson met Tex Winter, the brains behind an offensive system called the triangle offense. Winter developed an offensive scheme that relies on spacing, where three players position themselves in a triangle formation with the ball, opening up the two players on the opposite side and creating passing angles no matter how the defense reacts. If it sounds complicated, it is. (Check out this illustrated example.) But it allows a team the opportunity to be creative and it ensures that a superstar doesn’t need to shoulder the entire burden of running the offense.
Just as Kobe Bryant isn’t expected to devise a new offensive system from scratch on every possession, companies need a process for bringing products to market that their employees can operate within. If your startup is software as a service (SaaS), consider the Lean Startup methodology articulated by Eric Ries. If your company is in enterprise software, biotech, or some other field, research the latest methods that innovators are implementing and emulate them. Find your own Tex Winter. No organization can scale without a framework for utilizing your team and bringing a product to market, and don’t try to invent this framework from scratch. Instead, leverage the experience and knowledge of others, and modify your system as your company and experience grow.
3) Trust Your Employees
Watching Jackson on the sidelines of Staples Center, you might get the impression that he’s lackadaisical or even detached. During timeouts he leaves his players alone on the bench to talk among themselves, waiting until the last few seconds to huddle up and diagram a play. Of course, that’s when Jackson bothers to call a timeout, which he is often slow to do, even when his team starts to struggle. As basketball commentator Dr. Jack Ramsay once told USA Today: “There he sits, legs crossed (and arms folded). Anybody else…would jump up and say, ‘Timeout! Timeout!’He wants them [the players] to figure it out. I don’t know any other coach ever who has used that technique.”
With good personnel operating within a flexible system, Jackson trusts his team to get a feel for the game’s rhythm and make the modifications necessary to compete. This is similar to the approach we had at PayPal, where employees were encouraged to speak up and propose big ideas. As Jeremy Stoppelman, now the CEO of Yelp, once told Forbes: “I was a 22-year-old whippersnapper, and I remember firing off this e-mail that disagreed with the entire executive staff. I didn’t get fired—I got a pat on the back.”
4) …But Know When to Shorten the Leash
While Jackson doesn’t micromanage, he knows when to step in and intervene for the good of the team. In game 7 of the Western Conference Finals against the Portland Trailblazers in 2000, the Lakers fell behind by 15 points early in the fourth quarter at home. Jackson, who had been up pacing, called timeout and screamed at his players as they approached the sidelines. IMHO, the shock of the coach’s rebuke and the resulting infusion of energy this brought to the players worked, causing Kobe, Shaq, and the rest of the team to rally, win the game, and take the series.
Sensing a team’s energy and cohesion is an important part of leadership, and knowing when to step in and be more hands-on is important. It’s often hard for newly minted entrepreneurs to know when to do this, and I don’t think there’s a hard-and-fast rule as to when this is appropriate. It requires knowledge of your team and the circumstances. And sometimes it can mean making difficult choices, especially if a change in personnel is required. But being an entrepreneurial Zen master doesn’t mean you never raise your voice.
5) Adapt Your Strategy to Data
Phil Jackson has a reputation for making adjustments when they matter most. In the first round of the playoffs this year, Oklahoma City Thunder point guard Russell Westbrook was killing the Lakers. Taking advantage of his speed against L.A. guard Derek Fisher, Westbrook averaged 22 points over the first 4 games as the upstart Thunder pushed the Lakers to a 2-2 tie. In game 5, Jackson surprised the Thunder by switching Kobe Bryant to defend the young player. Against the faster, longer Bryant, Westbrook’s scoring average over the next 2 games fell to 18 points and the Lakers closed out the series in game 6.
Putting Bryant on Westbrook was hardly rocket science, but Jackson made the adjustment based on data, and in doing so exhibited a willingness to abandon a matchup he had drawn up before the series started. Likewise, entrepreneurs need to make adjustments on what they see and measure. Strategies that make sense pre-launch need to be tested against the reality of quantifiable data, and, when the circumstances warrant, the startup needs to be able to pivot. (For a description of what it means to pivot, read this post by Mark Suster.) Don’t fall in love with your own ideas.
6) Give Your Team a Psychological Edge
On Monday, Jackson fired a verbal salvo at Celtics forward Kevin Garnett, saying Garnett was “smacking” people around and that wasn’t his team’s style. Garnett laughed it off, saying, “It’s just Phil playing mind games.” But Jackson had done his part to ensure that a news cycle revolved around his comments, and also tacitly instructed the Lakers home crowd to react to the Celtics’ physical defense in a way that will likely sway a few calls by the referees. Early this postseason, Jackson said that Kevin Durant of the Thunder gets too many foul calls from officials. Durant reacted with surprise, saying he was unsure why Jackson “disrespected” him, and the league fined Jackson $35,000 for his remarks questioning the competency of their refs. But the journey inside Durant’s head was probably worth $35K to the coach, since the league’s leading scorer was held several points below his season average during the Lakers series victory.
Jackson intends for his comments to get inside his opponents’ head, and to sway the officiating in a way that benefits his team. In short, he sticks his neck out in public to influence the officiating, psyche out his team’s opponent, and give his squad some sort of psychological edge. Entrepreneurs generally aren’t in a position to bad-mouth their competitors to the news media (and even if you are, I’d suggest you think twice before doing so). But entrepreneurs need to do whatever the can to instill confidence in their team and give their personnel an edge in the marketplace. Would you be willing to take a $35,000 fine for your team? You would if you’re the Zen master.
* LeBron is an easy target, but many of the NBA’s best players from the past 20 years never won a title, including Carmelo Anthony, Dwight Howard, Dirk Nowitzki, Jason Kidd, Tracy McGrady, Steve Nash, Allen Iverson, Karl Malone, John Stockton, Patrick Ewing, and Charles Barkley.
Angel investor Dave McClure assembled several dons of the “PayPal Mafia” on-stage Tuesday night for a Startup2Startup event in San Francisco. The panel included Max Levchin (Slide), David Sacks (Geni and Yammer), and Jeremy Stoppelman (Yelp). With a lineup like that, my CapLinked co-founder Chris Grey and I made the pilgrimage up north from L.A. to catch the show.
Dave capably moderated this group of heavy-hitters — Max only chastised him once for a stupid question — and the audience was treated to some insightful and candid discussion. I jotted down a few highlights from the panel:
Why have PayPal alumni started so many other companies?
By all accounts, it’s a pretty impressive list of companies and organizations started by PayPal people. The group pointed to several reasons. First, the company was “stress tested” by assaults from multiple competitive, legal, regulatory, and operational threats (hence the title of my book). This process promoted innovation and prepared employees for the future rigors of starting their own companies. David Sacks noted that the company’s recruiting was viral — Peter Thiel brought in people from Stanford, while Max hired engineers he knew from the University of Illinois at Urbana-Champaign. This lead to higher quality recruits than if we had relied on recruiters or job placement ads. With one of the best lines of the night, Max pointed to the company’s hiring philosophy as a reason for the Mafia: “The best employees are the ones who feel this is the last time they’re going to work for someone else.”
How did working at PayPal help you innovate with your current startups?
Even though Eric Ries’ lean startup methodology had not been developed at that time, David Sacks said that PayPal had a form of agile development before the concept existed. The product focus was on iteration, not perfection, which let PayPal pivot both its platform (going from Palm Pilots to the web) and market vertical (from person-to-person payments to online auctions). David called Yammer the ultimate pivot, noting that it was a spin-off from an internal tool developed at Geni. Jeremy said that from day one at Yelp he was focused on “what will we have to pivot on,” enabling him to fine tune the company’s business model.
Now that financing is stabilizing, were startups right in rushing to raise money before the crash?
Jeremy lauded prudence when it comes to financing, and said it’s generally wise for entrepreneurs to take advantage of financing opportunities when they have them. Max drew a parallel with PayPal’s experience in 2000. As the NASDAQ neared its peak in April of that year, Peter Thiel rushed to close a $100 million financing round for the company. Within weeks the stock markets began to dive and financing for the tech sector dried up. Had Peter and his team not made that opportunistic decision, the company would not have had a long enough runway to fix the major problems with its business model and get fraud under control. Max said that experience shaped his thinking again in 2007, when he sensed that markets had become frothy and a hard landing was in the offing.
How do you measure success?
I’ve heard Dave McClure make the point that choosing the right metrics is one of the most important things a startup CEO must do, so this question wasn’t a surprise. Max said it was how many lives you impact with your service. Jeremy said it was staying relevant in a constantly changing world. David said it was whether or not your company achieved its mission.
Which company is the most entrepreneurial: Facebook, Google, or Apple? (Hint: Let’s hope Steve Job’s health holds up.)
The panel punted on this question, so Dave took a poll of the audience. Claiming that companies that keep their founders active tend to be the most innovative, Dave asked which of Silicon Valley’s hottest companies was the most “entrepreneurial.” While admittedly an unscientific poll, the results were surprising: Facebook trounced Google in a 2-to-1 landslide. But even more surprising, in a room of over 100 entrepreneurs, Apple didn’t get a single vote. Perhaps Apple’s PR team has oversold the brilliance of Steve Jobs?
The startup world has been buzzing this week after Sens. John Kerry and Dick Lugar introduced the Startup Visa Act of 2010. According to TechCrunch:
“[The bill] would create a two year visa for immigrant entrepreneurs who are able to raise a minimum of $250,000, with $100,000 coming from a qualified U.S. angel or venture investor. After two years, if the immigrant entrepreneur is able to create five or more jobs (not including their children or spouse), attract an additional $1 million in investment, or produce $1 million in revenues, he or she will become a legal resident.”
Paul Graham of YCombinator hatched the visa concept in April of last year. The cause was picked up by Eric Ries, Dave McClure, and several other tech thought leaders, who launched the blog StartupVisa.com and recruited many of the best and brightest in the industry (including Reid Hoffman, Mike Maples, Chris Sacca, Josh Kopelman, and Chris Dixon) to support the cause.
And allowing hard-working immigrants to move to America to create jobs is indeed a good cause. I’m not sure that I’d go so far as the TechCrunch guest writer who implied that only xenophobes could oppose it, but overall importing the world’s entrepreneurs into America is a decent idea. Let’s take all the intelligent, hard-working innovators who want to come here legally that we can get.
Fantastic. But once the congratulatory back-slapping ends, I have a question for the entrepreneurial community: what about taxes? I don’t hear a lot of my fellow entrepreneurs talking about tax rates, and their silence is deafening.
The federal capital gains tax rate is set to rise from 15% to 20% next year, and President Obama previously indicated he’d entertain something in the 25%-28% range. Meanwhile, according to the Tax Foundation, America has the second highest corporate tax rate in the world, trailing only Japan, and 24 states actually have higher rates than Japan. (Thanks to Dave McClure for the link.)
According to the Cato Institute, studies in comparative economics suggest that “total government spending (federal plus state plus local) should be no lower than 17 percent, nor larger than about 30 percent of GDP.” They cite an analysis by the Institute for Market Economics in Sofia, Bulgaria, that concluded that “there is a 95 percent probability that the optimal size of government is less than 25 percent of GDP.” As of last year, the US stood at 36%.
America is comparatively over-taxing its companies and capital. Importing entrepreneurs is great, but it’s also muted when the government’s punitive tax code undermines incentives to invest.
So, entrepreneurs, what are you going to do about it?
The so-called PayPal Mafia has gotten a lot of press recently. My former colleagues have gone on to start, run, or fund an incredible roster of companies, including Yelp, Founders Fund, YouTube, LinkedIn, SpaceX, Facebook, Tesla, Palantir, Geni, Kiva, Slide, and Yammer. Clearly, something was in the water at my old company.
While I wrote about my experiences in my book The PayPal Wars, a book can only capture so much information, and that narrative only recorded my perspective. So, over the months to come, I plan to interview some of the amazing entrepreneurs whom I was fortunate enough to work alongside at PayPal. Many of them are well known, and others have been working behind the scenes, but they all have valuable insights to share. Since I’m on the strategy/product marketing end of the spectrum (as opposed to branding), I’m christening the series with the predictable yet appropriate name: “PayPal Mafia Confidential.”
My first interview is with Giacomo DiGrigoli, who served as PayPal’s first product manager for international payments, and most recently he was a product manager at Yammer. Giacomo graciously shares his lessons from working at PayPal, trends in Web 2.0 startups, and the differences in starting a company in L.A. versus Silicon Valley.
Eric: I had the pleasure of working with you at PayPal, where you were the product manager in charge of building PayPal’s international service. People may not appreciate how complex PayPal is behind the scenes, but building the international product was a massively complicated undertaking. Looking back, what lessons can be drawn from this product launch?
Giacomo: First off, the feeling is mutual — it was a pleasure working with you as well.
Building and launching PayPal’s international service, including the multiple currency platform, was indeed a complex project with many hidden moving parts: multiple countries, languages, regulations, currencies, etc. Not only did we tackle the intricacies of designing, building and marketing a new consumer-facing product, but every one of our internal and technical back-end systems also needed to be upgraded from the ground up to account for new functional requirements, including operations, analytics, chargebacks, and fraud detection. On top of that, PayPal was already a significantly popular product with millions of active users, quickly becoming the ecommerce lifeblood for much of the web. There was very little room for error.
The most valuable lesson I took from that experience was one that many startup entrepreneurs are familiar with: build small and simple, and iterate fast. We rolled out the project in small stages, building on user feedback to offer direction for next steps, and to mitigate the operational and technical risks of relaunching PayPal’s core platform to accommodate our international users. We cautiously measured each step to insure for PayPal’s longterm international success and to insure as little disruption as possible.
I learned that there’s almost no such thing as too much communication between team members, especially when handling a change as large as what we had on our hands. For months, we prepared our teams for a massive change to our systems, planned for the worst and hoped for the best. We communicated each change clearly to our entire organization, and worked closely with teammates in marketing, operations, legal, customer service, analytics, and fraud operations to constantly insure that any changes we made to the product wouldn’t create any disruption to our millions of users. We prepared for a massive onslaught of customer service issues that would backlog us for weeks. For the tremendous revenue uptick and success that the product turned out for PayPal, I’m proud to say that the multiple currency launch was one of our best received, least disruptive launches.
Lastly, I learned the importance of trusting your teammates and delegating responsibilities across an organization. At PayPal I had the pleasure of working with some of the most talented and dedicated designers, coders, marketers and business minds in the valley (and in our operations center in Omaha, NE). Without the solid dedication and extraordinary talents of those team members who welcomed the massive challenge of this project with open arms; whose leadership, sense of ownership and willingness to share in a grander vision for PayPal in their respective portions of this product launch made an immeasurable difference, this project simply would not have been possible.
Much has been said about the competitive, fraud, and legal obstacles PayPal had to overcome before it finally became profitable, IPO, and eventually be acquired by eBay. To what do you attribute PayPal’s success?
Well, much has been said and written about the extraordinary talents of PayPal’s management team (Peter Thiel, David Sacks, Max Levchin, Reid Hoffman, Roelof Botha, etc.), and the significant contributions made by PayPal’s product, design and development teams, and I would agree wholeheartedly that our spectacular leadership played a significant role in PayPal’s success, so I won’t spend much time discussing that. Instead, I’d like to focus on the team dynamics that I believe played an equally important part of PayPal’s success.
One of the things that made PayPal such a unique and uniquely successful product was our extraordinary team culture. Our team not only enjoyed the work we were doing, but genuinely enjoyed one another’s company. We trusted one another. We challenged one another as much as we challenged ourselves. We had culturally and professionally diverse points of view, sometimes completely at odds with one another, but we were always respectful of one another’s viewpoints. We shared a collegial spirit of learning and teaching one another new things, and learned from our differences. We made decisions, weathered mistakes, took on new exciting challenges and ultimately enjoyed our successes (and setbacks) together. Our management team trusted us to make decisions, and we in turn took that trust to heart with a deep respect for the opportunities we’d been handed. We were a team with clearly defined goals and responsibilities, and we took our work seriously. We were connected closely to our customers (and in some cases, we were our own customers). We cared.
Very often you hear of startup teams that are unmotivated, lack direction or inspiration, or just don’t click with one another on personal or professional levels. To me, that’s the kiss of death for a startup. If you walk into a room and it feels like a pall is sitting over that group of teammates, that no one is enjoying their work, or that people just aren’t enjoying one another, then you might as well close up shop. The odds are already stacked against a startup the moment it’s created — if your team can’t find the inspiration and joy in working with one another, it makes the rough times even harder, and the good times less pleasurable and motivating.
I think a large part of PayPal’s success, especially in the bumpiest parts of the road, came down to the fact that everyone who was there genuinely believed in one another, believed in our product, and enjoyed the challenges each day brought us as a team. I’d encourage startups to always remember that: you should be there because you WANT to be there, and because at the end of the day, you really love and are passionate about what you’re doing. Otherwise, it’s just not worth it.
Over the past few years, you’ve played a key role in launching a pair of Web 2.0 startups, Geni and Yammer. In what ways have starting Web 2.0 companies been different from starting their Web 1.0 predecessors?
IMO, it’s a heck of a lot easier to start a new tech company today than it was ten years ago (or maybe I’m just ten years older). First off, there’s been quite a bit of development in the enterprise space specifically geared towards helping new startups and small companies communicate, build, launch and learn about what competitors are doing than there were a while back. Whenever I have a technical issue that I think might slow down my progress, I can easily find a product that solves even the very specific niche issue I’m having and move on. I can consult tech blogs like TechCrunch, TechMeme, etc — resources that really didn’t exist in earnest a while back — to discover what’s going on, find new products, etc.
Enterprise communication has also taken off, as evidenced by products like Yammer, SocialText, Chatter, etc. It’s much easier to effectively and quickly communicate within an organization than it was when you had to email your questions back and forth. Things are much faster now.
I also think that with ease of development comes greater expectation from consumers. I’ve noticed far less tolerance for bad design from the every day consumers using language that was previously only used by designers and developers. When my 13-year-old niece complained that “Facebook’s new newsfeed UI sucks; I hate it!” I knew that consumer expectation was growing just as fast as our ability to launch new and interesting products. So, with ease of development and great new technologies like AJAX, the ubiquitous use of Flash, etc, comes greater responsibility for great products.
Yammer has really taken off, and it’s done so as one of the few social media companies with an enterprise focus. In fact, the very term “social media” seems to connote communication services for friends, as opposed to tools that can actually enhance workplace productivity. Do you think that enterprise-level development is a good business opportunity for Web 2.0 companies, or is Yammer the exception to the rule?
Absolutely. I think new enterprise products (social or otherwise) have only just begun to become commonly used in many organizations, and there’s still quite a ways to go to make these new tools as effective and ubiquitous as other tools (like email). In many ways, I think these tools are slowly supplanting the majority of the need for email, intranets, etc. But I still think there are tremendous inefficiencies within the enterprise space that still need to be solved, beyond improving communication. Areas ranging from hiring and retaining talent to payroll to investing in new technologies to corporate development still need to be mined for better solutions. I’m still shocked at how long some seemingly simple enterprise tasks take – there’s a mountain of opportunity here. Any time you’re annoyed or shocked by something while working, that’s almost always an enterprise opportunity around that.
Switching gears back to PayPal, without a doubt it’s the undisputed leading service for selling physical goods online. But as the web becomes more social and virtual goods grow in importance, do you see a role for PayPal as a Web 2.0 payments provider? Or will Facebook (or some other competitor) eat their lunch?
I recently attended the PayPal X Developer conference, and it looks like PayPal is making some significant inroads with the development community.
I think the game is still on here. Facebook has certainly made some strides with its platform, and including a full-fledged payment option would certainly be a threat to PayPal’s continued growth. But until/unless the basic platform of the web fully switches from the web to Facebook, or an OS, or a browser, I think there’s still an opportunity here.
The risk for everyone involved, of course, is the same one that PayPal faced playing on a platform owned by a 3rd party. eBay certainly didn’t make it easy to be a successful 3rd party on its platform, and certainly we’ve seen evidence of this on other platforms as well (e.g FB’s constantly changing platform, rules, distribution & emphasis on apps, etc). The argument on the flipside, of course, is the same one that lead to PayPal’s success: sometimes it takes a 3rd party to focus on complex tools (like payments) to really make them work reliably well.
I think it’s really still anyone’s game in social/Web 2.0 payments, especially in the platform/virtual goods and mobile payments space. I’d also keep an eye on innovative payments products like Jack Dorsey’s Square – there’s still a chance for something completely out of left field to surprise everyone.
I may get some flack for this answer (especially from the likes of LA cheerleaders like Jason Calacanis), but I think startups in the valley are significantly easier to put together initially than their LA counterparts. There’s no question that the opportunities available to entrepreneurs in the valley are much greater than in LA: tech meetups, conferences, VCs, finding coding talent, etc. I tell people that starting a tech company in LA is like making a movie in the valley: sure you could, but why would you want to? Everybody else who’s seriously working on tech is in the valley, and everybody seriously focused on entertainment is in LA. You’re stacking the cards against yourself. That being said, LA has certainly produced some great products as well. It’s just a little bit harder than in the valley.
Likewise, I also think that over the last few years, we’ve seen some great innovation internationally as well. Thought leaders in Europe are making new strides — people like Loic LeMeur at Seesmic (and the Le Web conferences) are creating some innovative and interesting new products/designs. So it’s not just about the valley anymore (but it’s still my favorite place to work.).
What’s next for you?
I’m working on a small digital media publishing product with my good friend Holcombe Waller. It’s really just a small garage idea at this point, but we’re enjoying our work, and thrilled about developing something fun and innovative that we enjoy using ourselves. If anyone’s interested in a demo, I’ll be more than happy to share. Stay tuned!
Starting a business is hard. I know that first hand. I saw what the management team had to deal with when I was at PayPal (which I wrote about in my book The PayPal Wars). Following PayPal, I put nearly 6 years into my own company, World Ahead Media, and along the way I made nearly every mistake that an entrepreneur can make. World Ahead was a publishing venture that used new media tactics to market its books through online and offline sales channels. We carved out a specific niche for our products (i.e. current affairs/non-fiction with a pro-freedom editorial focus) and were able to use our online marketing tactics to attract lots of MSM coverage (e.g. CNN, Fox News, MSNBC, Daily Show, WSJ, NYT, LA Times), thereby letting us avoid doing any costly advertising. But it was still a tough business. It took us 4 years to reach $1 million in annual revenue and to turn an operating profit.
As the CEO, on a daily basis I had to monitor key metrics to figure out if we had the right product, marketing, and distributions strategies. But that’s the “important” stuff that entrepreneurs enjoy tackling, the kinds of market- and process-related challenges that you anticipate when creating a company. What I didn’t fully appreciate when I set out on this journey was the amount of effort that would go into the administrative needs of a young company. Those are the non-operating tasks that are critical to building a healthy business, but are at best on the fringe of an entrepreneur’s gaze as he surveys what his company will do. However, just because they aren’t directly related to the entrepreneur’s vision doesn’t mean that these sorts of responsibilities are unimportant. Areas that generally fall into this category include legal, corporate governance, human resources, and investor relations.
Let me tell you, I made a lot of screw-ups dealing with these administrative responsibilities. I could give you a laundry list of mistakes, and perhaps I will in a future post. But for now suffice it to say that as a young, first-time CEO I had my share of fubars. And with hindsight, I think the type of oversight that I regret the most — and have the least excuse for — was often failing to keep my investors in the loop. It’s an easy trap to fall into. Just getting investment capital is hard enough in the first place! And once the capital is finally in the bank, an entrepreneur instinctively shifts gears back toward his product and his market. While there are a few events that trigger communication with shareholders, such as distributing quarterly financials or holding annual shareholder meetings, it’s very easy to overlook your investors when you’re in the thick of things.
Since late 2008 I’ve been advising a number of startups and nonprofits, and during that time I’ve seen other entrepreneurs and founders make the same mistakes as me. I’ve also seen successful entrepreneurs reach out to their peers to coach them on this topic, so I know that I’m not the only one who thinks this is important. Last year, I heard Jason Nazaar of Docstoc give a great talk at a Dealmaker L.A. workshop on communicating with your investors. Recently, Dan Martell of Flowtown wrote a terrific blog post with templates to use for keeping advisors in-the-loop, and this could be applied to shareholders as well.
Helping entrepreneurs avoid these pitfalls is one of the reasons I’m starting a new venture called CapLinked. It’s still in development at the moment, but we’re in the process of building features that bring simplicity, reliability, and transparency into the relationship between entrepreneurs and their investors. Right now, we’re getting feedback from entrepreneurs and investors so we can fine tune our feature list. If you have a story you’d like to share with us, we’re listening. Hopefully we’ll be able to make one aspect of entrepreneurship just a little easier.