Archive for December, 2008

Quotes for Entrepreneurs – December 2008

Written by Sean Murphy. Posted in Quotes, skmurphy

I like to collect quotes. I think these are particularly appropriate quotes for entrepreneurs–your mileage may vary. I post them first on and summarize them once a month, older blog posts about quotes are available at Enter your E-mail if you would like Feedburner to deliver new blog posts to your inbox.

I realize now that using Twitter, while encouraging me to collect more new quotes, forces me to focus on ones that will fit in an SMS message. I am thinking of retitling this “Pithy Quotes For Entrepreneurs” where pithy means both “precisely meaningful; forceful and brief” and “short enough for Twitter.” When Shakespeare penned “brevity is the soul of wit” he didn’t know the half of it.

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“Innovation isn’t what innovators do….it’s what customers and clients adopt.”
Michael Schrage in “Michael Schrage on Innovation” interviewed in Ubiquity

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“Bottom line: anytime a failed startup is ‘acquired’ and the service is shut down, you don’t have an acquisition. You have a Silicon Valley signing bonus.”
Drama 2.0

Update April 30, 2011: the Drama 2.0 blog is offline, URL was For other writing see:

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“Contentment is wanting what you have.
Ambition is wanting what another person has.
Progress comes from wanting what nobody has.”
Bob Lewis “Random Thoughts

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“I will evangelize hard work and editing by making it show in everything that I do, make, and share.”
Merlin Mann in “Better

This is my abridged “twitter version” (used with Merlin’s permission) of his original quote:

I want to become an evangelist for hard work and editing, and I want to get to a place where it shows in everything that I do, make, and share.
Merlin Mann in “Better

I think this will be one of my 2009 resolutions.

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“Planning is a means. If it becomes an end, that’s a problem. Without planning, everything encountered is completely new.”
Will Kamishlian

See “Planning in a Bootstrap Startup: a Model from Will Kamishlian

As Theresa observed in “3 Tips for Entrepreneurs Planning a Startup

Startups need a lightweight planning and development model to thread the narrows between “just do it” and “let’s study the problem a little longer.” We use an one-page planning model to develop an operating plan.

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“Wisdom is as the moon rises, perceptible not in progress but in result.”
Chinese proverb

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“The future not being born, my friend, we will abstain from baptizing it.”
George MeredithBeauchamp’s Career

I had used this in November 2006 in “Thoughts on Perseverance and Promises” but Cisco’s positioning itself as the archetype of the first successful Enterprise 2.0 firm in Fast Company led me to recycle it in “Cisco Presents Collaboration Technology as Sufficiently Advanced.”

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“Saddle your own horse, cull your own herd, and bury your own dead.”
Col. Knute Lombatton (cited in “Old Bull, Young Bull” hat tip to Brian Dunbar )

I thought this was a good definition of bootstrapping.

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“It’s wisdom to recognize necessity, when all other courses have been weighed, though as folly it may appear to those who cling to false hope.”
JRR Tolkien

The recession is forcing a lot of firms to make hard decisions about product mix, staffing, and plans for 2009. This is only my second Tolkien quote, in “Please Be Healthy” my post about an E-mail I sent to an entrepreneur facing some tough decisions in July of 2007 I used this stanza from Lord of the Rings to encourage him:

“All that is gold does not glitter,
not all those who wander are lost;
the old that is strong does not wither,
deep roots are not reached by the frost.”
JRR Tolkien

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“Be careful whose advice you buy, but be patient with those who supply it. Advice is a form of nostalgia.”
Mary Schmich from her “Advice, like Youth, Probably Wasted On the Young

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“The key thing is always being able to roll back if things go seriously wrong; hardware is much, much cheaper than downtime.”
Laurie James Voss in a post on Hacker News answering “How do big web sites roll out new versions?

Voss’ answer struck me as more broadly applicable. It reminded me of points that Sandy Jens made at Structure08: avoid “trap door transitions” that you cannot undo, make small, easily reversible changes to explore improving the user experience.

2008: Year-End Review of Client Metrics

Written by Theresa Shafer. Posted in Tools for Startups

I am doing end of the year status for clients. I thought it would useful to share the best case numbers as well as the worst case numbers. We had a fun year working in the areas of banking & financial services, cloud computing, consulting, EDA, health care services, medical devices & services, search & text analytics, solar & renewable energy and team productivity tools.

Best Case Worst Case
Lead Generation
Mailing List Growth 593% 22%
Mails to List 55 1
Website Visits 120% 15%
Web Presence in Google 182% 27%
Inbound Links 8100% 40%
Website Grades 17 to 63 74 to 76
Press Releases 5 1
New Partners & Advisors 3 0
Joint Partner Announcements 43 2
Events 6 0
Marketing Material
Whitepapers, articles, blog post, website pages, success stories 17 3
Revenue $723K $0 – not a full year$8K

Working On Christmas Day

Written by Sean Murphy. Posted in skmurphy

I didn’t work Christmas Day but was glad that some other folks did.

After we had opened presents and enjoyed them for a while we got the turkey stuffed and into the oven. It was 11am, which put us on track for a 6pm dinner.

A thunderstorm was really blowing outside and just a few short steps carrying wrapping paper to the recycling bin had convinced me it was going to be a good day to stay indoors. To make it seem a little more festive we lit a Christmas candle. At first I thought someone had turned out the lights to see the candlelight a little more clearly but the aquarium motor had stopped and the stereo had gone off as well.

It was 11:40 and the power was out.

The lights had flickered out briefly earlier in the morning so we sat there for a few minutes in silence waiting for them to return. We then started to find activities that didn’t involve electricity. I decided to catch up on my backlog of unread magazines.

After about an hour I remembered that there was a PG&E outage status phone line (1-800-743-5002) that allows you to enter you telephone number and learn when they expect to have power restored. I called in and learned that they expected it to be fixed between 4 and 7pm.

I felt really glad that someone was out in the cold working to bring my little section of San Jose back onto the grid.

The power came back on a little after 4 and we realized that the turkey would now be done by 11pm. My teenage boys thought that would be a good time for a snack but we realized we probably needed to find a place that was open for dinner since most of our provisions were intended for a turkey dinner that was going to be five hours late.

My daughter thought that the Cardinal Lounge was open so we checked the website–“We are open 24 hours, 7 days a week 365 days a year”–and headed out.

It was a little eerie riding around San Jose at 5pm on Christmas Day.

It reminded me of driving with my father when I was a boy in St. Louis: a snow storm had been followed by an ice storm. The power was out and the landscape was utterly transformed: blanketed in white with the trees looking like crystalline structures. You couldn’t see the lines on the street but it had stopped snowing so the plows were out.

No snow or ice, but not many people. We drove by a number of places that had their signs on but no cars around them;  we looked in and they were clearly closed. We fell into a discussion about who was still working.

“The sysadmins,” I said.

“Who are they?” my oldest son asked.

“The folks who keep things running at the places that never close. For example people who work in a hospital, a police station, a power station, a fire station, a taxi company, a tow truck company…”

“…and the Cardinal Lounge,” added my youngest.

They were busy but we had a great meal. And I was glad they were working on Christmas Day.

Three Answers We Need Before We Will Use a New Productivity App

Written by Sean Murphy. Posted in Rules of Thumb, skmurphy

  1. Do You Have a Pricing Model?
    We use many web applications to run our business and deliver services. Often our clients are also users of the application. If the application has a problem our clients hold us accountable. We need to see a commitment to support and 24×7 operation. If we are paying for it, we can normally get someone answer our e-mails and phone calls. We will start an evaluation if the pricing has not been worked out, but we won’t use it with clients.
  2. Can We Get All of Our Data Back Out of the System in a Useful Format?
    And then delete it from the system. If we can’t get our data out in a format that’s portable to other tools/systems then we won’t want to start an evaluation. HTML, Excel (e.g. CSV), and SVG are three good export formats.
  3. Is The Beta Application or Contact Request Acknowledged Within Two Days?
    If they are going to take longer than this to get back to me when they want my business what will they be like when they have my money.
    • Make it clear you will send me a e-mail with what I put in the form so I don’t have to cut and paste to save a copy.
    • Don’t send me a quiz asking what I am willing to do to promote the application before I have seen and worked with it.

Cisco Presents Collaboration Technology as Sufficiently Advanced

Written by Sean Murphy. Posted in 2 Open for Business Stage, skmurphy

I worked at Cisco for more than a decade in two stints between 1990 and 2003–taking time off from 1995-98 to work with a number of web startups–so I was intrigued to see John Chamber’s picture on the cover of the December issue of Fast Company. In the feature article by Ellen McGrit titled “Revolution in San Jose” Chambers deploys his personal sales skills and his marketing team in a well coordinated approach to “shape the battlefield” for new (or at least acquired and integrated) collaboration technologies from Cisco.

We have been early enthusiasts of web based collaboration technologies and have worked diligently to leverage them not only within our business but in our engagement model with partners and customers.  But their benefits can be oversold and they require considerable change in your internal processes and methods to take advantage of.

Just as the steam engine, the telegraph, electricity, and the telephone took decades to go from invention to full business impact, I keep George Meredith‘s guidance in mind when it comes to the perseverance needed to discover new technology applications and deploy them in production: “The future not being born, my friend, we will abstain from baptizing it.”

I was surprised to read “Cisco as an Emerging Enterprise 2.0 Case Example” by Jim McGee, an astute observer of knowledge management and collaboration technologies, that the Fast Company article as “…a well-documented case study that is an existence proof to other skeptical executives that the combination of Enterprise 2.0 technologies and the right organizational principles and practices can succeed.” A number of activities are described in the article but only three proof points are offered. The first is cited by McGee in his recap:

“The boards and councils have been able to innovate with tremendous speed. Fifteen minutes and one week to get a [business] plan that used to take six months!”

But I would be very cautious that this was anything more than hyperbole. It’s also only an intermediate result: how much revenue has the innovation actually delivered. The second and third proof points are offered by Ron Ricci:

“Across the company, Ricci says, fiscal 2008 saw “a tenfold increase in new projects.” And he points out that operating expenses have been trimmed from about 38% at the height of the tech boom to between 35% and 36% today: “We’re shaving 2% to 3% of profit off of every dollar of revenue we get in.”

But this offers scant proof of a new level of competitiveness: it’s always easy to start new projects, the real challenge is to get them to complete on time with the features that deliver new revenue. Offering as a cost reduction benchmark a comparison between the organization at the height of the bubble and today is unintentionally misleading at best: anyone who doesn’t have better expense control in place compared to a time of hypergrowth probably didn’t survive the dotcom collapse. Cisco’s market cap is perhaps one fifth of what it was then–and still about 25% below where it was five years ago. This sentence in the article goes to the heart of my misgivings:

“Taken to its ambitious conclusion, Chambers wants customers to remake their companies in Cisco’s image, a prospect possible only because of their dependence on Cisco technology.”

One of the hallmarks of a real test case would be some false steps and clear lessons learned. Most new technologies don’t work in the beginning and require a long period of experimentation and process re-design. This story is just too wonderful. And I say this as an everyday user of Office 2.0 technologies. Merlin Mann has some related thoughts in “Real Advice Hurts

Turns out that, as with a lot of injuries, the entirely sensible impulse to protect and baby a wounded area was the opposite of what Anne actually needed in order to fix the problem. So, by enduring the excruciating pain of chewing gum for just a few minutes, the muscles in her throat suddenly unclenched, and Anne’s pain went away forever.

The advice Anne wanted wasn’t the advice she needed. And, like we all eventually learn, the best advice you’ll get in life hurts like hell at the time. Because it has to.

A startup, lacking Cisco’s brand power, must tell real success stories that address the key changes that an organization must make to be able not only to use but to leverage a new technology fully.

On a side note I am not sure why they let Ellen McGirt take off with a “socialism” angle on their emerging management structure. Tom Malone presciently described how computer networks would lower the cost of coordination to the point that command-and-control management models would give way to cultivate-and-coordinate models in a 1991 article in Scientific AmericanComputers, Networks, and the Corporation” (1995 reprint here with graphics). There is a nice short interview with Malone by Peter Schwartz entitled “Re-Organization Man” in the July 1998 Wired that opens with these three exchanges that succinctly encapsulate the impact on collaboration technologies on organization structure and management:

Wired: You advocate for business leaders to “cultivate and coordinate.” How so?

Malone: The classic management phrase is “command and control.” If we believe that top-down, centralized management will become less and less desirable and less and less common, the question becomes, What could take its place? The notion of cultivation provides perspective from which we can legitimately think it’s fine if we’re not in control.

Wired: The other part comes from your idea of coordination science?

Malone: Right – part of which comes from the work of economists like Ronald Coase and Oliver Williamson. Compare two generic ways of coordinating any business transaction. One is to have hierarchical authority, a boss, who tells each person what to do so that two activities fit together. The alternative is to coordinate the same two activities as separate players in a marketplace. While with market-based coordination you are able to take advantage of economies of scale, you may have to do more negotiation. You almost certainly have to have more contracts or formal billing mechanisms. Markets allow you to have lower production costs, but generally result in higher coordination costs.

Wired: Yet your studies also suggest that infotech reduces coordination costs.

Malone: Exactly. In general, information technology reduces the costs of coordination, so what makes markets undesirable in some situations becomes less important.

Needless to say this is not socialism, it’s capitalism. Wired and Scientific American are not obscure publications, why Cisco didn’t credit Malone (or look back further and credit Doug Engelbart and J. C. R. Licklider) in addition to Gary Hamel is odd. The title of this post is a riff on Arthur C. Clarke‘s Third Law of Prediction: “Any sufficiently advanced technology is indistinguishable from magic.

Update December 17: Jim McGee and I have had some useful exchanges on his FastForward blog and he has left a question that I need to give some thought to:

What’s the most useful balance between tracking what Cisco is doing as both a large scale organization and a technology vendor with an interest in promoting Enterprise 2.0 as well as taking advantage of it? Perhaps the next question is how can we get Cisco to tell us more about what’s worked and what hasn’t worked in their early adopter efforts.

I welcome your advice and observations either here or on the original thread.

Update December 18: Michael Sampson‘s latest blog post “PTG Implements SharePoint Server to Improve Project Collaboration for PWC Sales” contains the following succinct advice:

The key takeaway though: if you want an independent opinion on which technology platform to use to support business needs, don’t ask a vendor-aligned partner for advice. That’s generally true of any vendor and its partners, so this isn’t a Microsoft-specific comment.

Last Full Work Week of 2008

Written by Sean Murphy. Posted in Events, Rules of Thumb, skmurphy

One of my old bosses would append this footer to all of the project schedules he published:

Warning: Dates in Calendar Are Closer Than They Appear!

I mentioned in “6 Work Weeks (or Less) Until 2009” that the weeks of December 15 and 29 were half weeks:

  • Dec-15: unless you are chasing end of year budget can be very slow [Half-Week]
  • Dec-22: normally a good time to reconnect with friends and family [Full Week for hermits]
  • Dec-29: last chance to file paperwork with a 2008 deadline [Half-Week; Full Week actually but halfway through it you are in 2009]

Here are some logistics issues you should take care of now instead of early 2009:

  • If this is your first year in business: get your accounting system–normally QuickBooks for startups–in order now! Schedule a meeting with your accountant or interview candidates and select one this week. If you are based in Silicon Valley we are huge fans of Ogden Lilly.
  • If you haven’t reviewed 2008 take some time this week to write down what you accomplished and what you have learned. That allows things to percolate so that the week of Dec-29 be used for planning 2009.
  • If you’ve been working on a startup idea but haven’t incorporated yet get your paperwork in order but postpone filing until the first week in January: in some states this will save you paying 2008 annual fees for two weeks of operation in December and then 2009 annual fees. We like to see teams incorporate sooner rather than later if only because it gives you a vehicle to do business with that’s better than a collection of sole proprietors.
  • If you are stuck trying to pick a name we suggest you contact Athol Foden at Brighter Naming, his team has a clear process that’s startup friendly outlined on his website. You can pick which steps you would like assistance on and which you want to do on your own.
  • If you need a good attorney for your startup contact Rob Dang at FortisGC.

steaming hot coffee and serious conversation, tell me again why these are so damn early in the morning? We have one last Bootstrappers BreakfastsTM in December, it’s tomorrow at Coco’s in Sunnyvale. RSVP now we would be delighted to see you. If you’ve been meaning to come all year then tomorrow is the last day to do it. If 7:30 AM is just too damn early I have some good news: we are adding a fourth location that will start at 9:30AM. On January 23, 2009 we start meeting at Red Rock Coffee in Mountain View on the fourth Friday of the month.

Michael Arrington’s “Twice Shy” One Year Later

Written by Sean Murphy. Posted in Rules of Thumb, skmurphy

Last December Michael Arrington wrote “The Twice Shy Entrepreneur” lamenting that entrepreneurs like himself who had lived through the dotcom meltdown were more cautious. They were “once bitten, twice shy.”

Silicon Valley these days is made up of two kinds of entrepreneurs (I’m painting with broad strokes, bear with me). The first group is the old guard. These are people who started companies during the late nineties and up until the 2000 stock market crash. The second group was either in school during that period, or doing something other that working in the tech world, and have started companies after the fallout from the crash.

Generally speaking, experience counts for something. So you’d expect entrepreneurs who’ve been through the ups and downs of a tech startup to have an advantage over the newcomers. Or at least have an equal chance at success. But in fact the opposite may be true. A number of venture capitalists I’ve spoken with have said that too many “old guard” entrepreneurs are not being bold enough in their business decisions, and it’s hurting their startups.

What a difference a year makes. Now the “newcomer entrepreneurs” have had the chance to lay employees off and are encouraged by the VC’s on their boards to focus on profit and survival instead of bold growth. And the experienced entrepreneurs–like Arrington–are probably feeling a little less out of sync with the environment.

A year ago I wrote “Entrepreneurs, Luck, and Silicon Valley” which closed with  Richard Wiseman’s four principles for improving your luck from “The Luck Factor: Changing Your Luck, Changing Your Life: The Four Essential Principles.” They bear repeating:

  1. Maximize Chance Opportunities: Lucky people are skilled at creating, noticing, and acting upon chance opportunities. They do this in various ways, which include building and maintaining a strong network, adopting a relaxed attitude to life, and being open to new experiences.
  2. Listen to Your Lucky Hunches Lucky people make effective decisions by listening to their intuition and gut feelings. They also take steps to actively boost their intuitive abilities — for example, by meditating and clearing their mind of other thoughts.
  3. Expect Good Fortune Lucky people are certain that the future will be bright. Over time, that expectation becomes a self-fulfilling prophecy because it helps lucky people persist in the face of failure and positively shapes their interactions with other people.
  4. Turn Bad Luck Into Good Lucky people employ various psychological techniques to cope with, and even thrive upon, the ill fortune that comes their way. For example, they spontaneously imagine how things could have been worse, they don’t dwell on the ill fortune, and they take control of the situation.

Late Night Comments and E-Mail

Written by Sean Murphy. Posted in Blogging, Rules of Thumb, skmurphy

too true alas
See for more comics.
This scene plays out in one form or another several times a year.I have learned to:

  • send the E-Mail just to myself and read it again in the morning.
  • save the forum comment in a separate text file.
  • save the blog post for review in the morning.

Update Tue-Nov-5: Jim Treacher offers “I need to get some sleep. People on the Internet will still be wrong tomorrow.”

Prediction: Angel Investing Down in 2009

Written by Sean Murphy. Posted in Funding, skmurphy

I was still mulling over the implications of yesterday’s briefing by Nate Burgess when I came across “Prediction: Angel investing in 2009 will be up?” by Alexander Muse on the Texas Startup blog. Briefly his thesis is:

The angel investment market hovers around $12 billion each year.  I predict that the turmoil on Wall Street will actually improve the ability of startups to access investments from angels.  The logic is fairly simple, wealthy individual investors no longer trust Wall Street, but they still need to invest their capital. […] With the failure of the major brokerage houses investors may start looking locally to invest their capital.  They may seek out ventures in their own backyard where they can exercise some level of control and oversight.

More and more angels I know have been moving more and more funds out of their brokerage accounts and into their bank accounts. […] The lack of professional private equity will only increase the opportunities for angels to make great investments and their access to greater percentages of their own capital will mean startups will get more.

I have come to a different conclusion.

The current worldwide economic recession is lowering the wealth of many current and would be angel investors. Exits are driven primarily by acquisition. Companies who are potential acquirers are for the most part opting for expense and headcount controls in response to this recession. This means that acquisitions will be driven primarily by market consolidation objectives and not a desire for strategic advantage. This will drive acquisition prices much lower and make venture/angel investing less attractive. As ugly as the stock market has become, minority equity investments in private firms are not at all liquid and routinely subject to complete loss. I cannot see Angel investment growing next year.

This does not mean zero. But Angels can sit on the sidelines in a way that VC’s cannot: the VC’s have raised funds for the purpose of investment and are accountable to their limited partners for the management fees they are collecting, while  Angels are investing their own funds and are only accountable to themselves (and spouses).

Update Nov-10 Susan Campbell did a follow up “Interesting Finding on Venture Investment in 2009” referencing these dueling predictions and citing first half 2009 results compiled by University of New Hampshire Center for Venture Research report “Angel Investor Market Declines in First Half 2009

We Don’t Encourage Individuals to Form a Startup

Written by Sean Murphy. Posted in 4 Finding your Niche, skmurphy

“We are all here to do what we are all here to do.”
The Oracle in “Matrix Reloaded”

I have come to the conclusion that most entrepreneurship is involuntary. Either someone is an entrepreneur from the time they are young, which was my personal experience, or they are thrust into situations where their old career path(s) are foreclosed to them and they have to become entrepreneurial.

I have read a number of posts in the last few months about how a downturn–or now a recession–is a great time to start a company. For the most part they are written by folks who in some way make their living off of entrepreneurs, either preying upon them as investors or service providers.

We certainly provide services to bootstrapping entrepreneurs and I suppose it would be in my personal best interest to encourage more folks to start bootstrapping a startup. I don’t think for the most part it’s a reasoned decision. Successful entrepreneurs are certainly prudent in their approach to starting a new business, and disciplined in how they manage not only technology but also selling, employees, and risks.

But individuals who are motivated by making a lot of money, in particular making a lot of money in a hurry, don’t seem to have the patience and self-discipline to prosper–certainly in a downturn/recession. So I would only end up encouraging the underqualified by appealing to their greed or their desire for autonomy.

Also the people who ask “should I be doing this” more than once or a twice a quarter (the “normal rate of doubts” amongst entrepreneurs in my experience) and look for reassurance in seminars and blog posts about why now is the best time to start a company should think very hard stepping onto the entrepreneurial roller coaster. I personally wouldn’t want be anywhere else, but then that’s just me.

I don’t like to discourage entrepreneurs either. I am always energized by the opportunity to hear bootstrappers’ perspectives on their business and their markets. If you have time, please drop by a Bootstrappers Breakfast in December or January and learn some of the realities of bootstrapping firsthand from entrepreneurs who are doing it.

If you have made the decision to team up with people you trust to form a software startup, you can definitely come to us for advice (free and paid) and we can help you not only avoid problems but pursue sound strategies for establishing your firm in a market and growing it.

Related posts

Update Dec 8: Matt Maroon wrote a good post on this same topic “A Little Better Advice” which I intended to take in a follow up to this post.

Back when I was a B-list professional poker player I got a lot of inquiries from people I didn’t know asking me if they should go pro. A lot of other pros who were asked that question said no every time. And they weren’t really wrong to do so, because if you’re asking someone you don’t even know that question, no is at least 75% likely to be the correct answer.

It’s not a very helpful one though. I realized early that people aren’t really asking you if they should go pro. They’ll make their decision regardless what you tell them, and if they got far enough along in the process to start asking, the smart money was that they were going to do it in the near future. I’d bet that the majority of them did, even though almost all of them were told not to.

So instead of just giving them a flat out no, I asked them a bunch of questions. Do you have kids to support? How much do you need to make each month to make ends meet? Do you have enough saved up to break even for three months (or six if you’re playing live) and still have a bankroll left? What’s your win rate and sample size? […]

A lot of people probably ignored everything I told them anyway, just as they would had I said no (or yes for that matter, since they were going to anyway, though they’d blame me if it went badly for them). But I know I saved a few people from a lot of agony, and ended up encouraging a few who went on to have success with it. By not advising them one way or another, but rather giving them more information, I helped anyone who I could, and I at least didn’t hurt the rest.

Update Dec 12: I realize I addressed some of Matt Maroon’s concerns in “Entrepreneurs Need Gumption to Succeed.” We have 382 posts since October 2006, I will take some time to get a better index organized for cross-index and references.

Sobering Workshop By Corum on Software Mergers

Written by Sean Murphy. Posted in 5 Scaling Up Stage, Events, skmurphy

I attended a “Merge Briefing” workshop today offered by the Corum Group Ltd. on the status of software acquisitions. I had learned a lot from a workshop that Ward Carter, Corum’s CEO, gave at the Software Business 2007 conference and felt that this would be informative. It turned out to be much more. It was given by Nat Burgess, and it was quite sobering.

Burgess characterized merger and acquisition activity as either driven strategic considerations or by consolidation. Strategic software acquisitions are driven by major changes in the business environment caused new technologies, new or rapidly growing markets, or new regulation requiring IT infrastructure upgrades. Consolidation is driven by general financial uncertainty, IT purchasing slowdown, or regulation creating additional expense.

Burgess offered the perspective that, with the exception of a few highly strategic market sectors, we have moved from a market driven by strategic acquisitions to a consolidating market. Consolidation driven acquisitions tend to be done at lower multiples than strategic ones, and as mergers or acquisitions have historically accounted for 90 to 95% of the dollars in a software company exit this means that firms need to focus on recurring revenue models, clear ownership of all relevant intellectual property, and attacking a customer’s deteriorating cost or risk situation.

Corum offers a free weekly newsletter that tracks software merger and acquisition activity as well as quarterly briefings on-line. It was a sobering assessment but one that seems thoroughly grounded in the current realities. I was glad to be able to meet Nate Burgess and to hear the presentation. One thing that became clear as I was reading through the briefing book afterward was that acquisitions are going to be the overwhelming majority of exits for the foreseeable future, and I need to pay more attention to software M&A activity if our firm is going to be able to assist our clients in getting the best value for their technology and business.
Update: Nate Burgess blogged about the event and posted photos including this one that shows me sitting next to Craig Sirnio of the Angel’s Forum.

Craig Sirnio and Sean Murphy sitting in front row of a sobering merger and acquisition briefing by Nate Burgess

Bob Lewis on Progress and Economizing vs. Cost Cutting

Written by Sean Murphy. Posted in 5 Scaling Up Stage, skmurphy

“Contentment comes from wanting what you have,
Ambition from wanting what the other person has,
Progress from wanting what nobody has.”
Bob Lewis “Random Thoughts

Bob Lewis writes the “Keeping the Joint Running” E-mail newsletter, devoted to practical advice for leading IT organizations effectively.

From his column “In General, a Time for Generalists” Bob offer three tips for reducing expenses.

  1. Any schmuck can cut costs. Economizing–finding efficiencies that allow the organization to continue delivering as much service as possible while reducing costs–requires excellent management.
  2. Don’t try to solve it in big, bold strokes. The best solutions usually come from nibbling away at the problem.
  3. If everyone does everything the same old ways, all you’ll be able to do is cut costs — you won’t find any opportunities to economize.

I feel that there is a deep insight here: organizational change has a number of complex interrelationships that can yield sharply non-linear effects (sometimes no effect after seemingly large changes, and often small changes generating huge unintended consequences). Nibbling away allows you to proceed cautiously, especially when making cutbacks, to assess the effects. I have touched on a different aspect of this in “Doing Less with Less” but startups should be continually re-evaluating development and support methodologies, running experiments to see if changes in approach can yield more productivity or bona fide cost savings.

Cultivating Communities to Get More Customers

Written by Sean Murphy. Posted in 3 Early Customer Stage, 4 Finding your Niche, Customer Development, skmurphy

Attracting new customers is at the heart of every business. Active participation in a community can make you more visible and allows you to demonstrate expertise. Communities offer an informal network and forum for the exchange of ideas, tips and gotchas. These communities include professional groups who are faced with the same set of problems and challenges and are willing to share these problems and solutions with each other. These groups are also a source for direct leads and referrals once you have established your bona fides as a solid member (instead of being viewed as a tourist, or worse, a parasite).

Taking part in user community discussions allows you to build credibility and your reputation as a domain expert. Your participation will also provide you with ideas for new features and even new products, as well as insight for who would be good partners. User group forums will generate leads for your business whether you are a host or an active participant, provided that you are viewed as contributing to the needs of the community and the purposes it formed around. Mark Zuckerberg observed “Communities already exist…think about how one may help a community to do what they want to do.” Here are some suggestions for how you can help to contribute to a community:

  • Contribute to Group Forums, Bulletin Boards or Discussion Groups
    • Answer Questions
    • Contribute to a FAQ
    • Post short announcements of general interest
  • Plan Something Fun
    • Help to involve others in the conversation
    • Help newcomers get involved
    • Connect folks who can assist each other
  • Write Articles for the Newsletter or Website
  • Offer a training workshop to address common issues or needs
  • Be a Speaker
  • Provide Sponsorship (money to fund activities and/or donated prizes for member recognition)

Here is another perspective on the definition of a community from Adam Fields in The First Rule of Community:

“There is really only one rule for community as far as I am concerned, and it is this, in order to call some gathering of people a “community”, it is a requirement that if you are a member of the community, and one day you stop showing up, people will come looking for you to see where you went.”

User groups hold an enormous amount of knowledge and allow for “legitimate peripheral participation” (from Jean Lave and Etienne Wenger’s book “Situated Learning” that documented active listening in a community of practice). These groups allow one to not only join; the groups allow one to engage in a number of influential and informative discussions which are relevant to a prospect’s challenges.

User groups and forums are common places for people to search for answers and experts. When an individual joins these forums (or starts one), they are able to answer questions, ask questions, and contribute useful information. Communities offer opportunities to make your firm visible to prospects, if you are patient and willing to abide by the community standards and informal (“unwritten”) rules. Whether you are looking for customers or peers who will be good partners, it’s important to take a long term view and realize that trust is built over time. If you demonstrate an ongoing commitment to help others in small ways as well as large you will be establishing a reputation as a member of the community in good standing.

“‘I only did it for the publicity’ may turn out to be this generation’s ‘I was just following orders.'” Merlin Mann

To establish a reputation you have to be visible or reasonably well known, but it’s more important to be known for meeting your commitments and giving good advice. Active participation in a community should be with a view not only to making yourself visible but also allowing you a chance to demonstrate appropriate expertise. “Less is more” is a good guideline here, in that it’s better to have folks asking for your opinion than asking for you to stop repeating yourself. You should be making these same assessments of expertise and reliability of potential customers and/or partners, which means far more listening than talking.

If you can’t find acceptable communities to join and participate in, one option is to organize a community around a common set of concerns or needs. This requires supporting some of the logistics and helping to shape appropriate face to face and on-line interactions. Here are a couple of suggestions for starting a new community:

  1. Be clear on the benefits to the members. Many social networking groups focus on how members bring benefits to a user site, but they are not very clear on what the benefit is to the members.
  2. Treat this as a conversation with all people. It is important to have a dialogue with both customers and non-customers.
  3. Remember face-to-face dialogue. This is critical to on-line communities and ecosystems.
    • Blend on-line and face-to-face events in complementary ways. A typical face-to-face kickoff will inject a lot of energy and useful context into ongoing on-line interactions.
    • Consider a use of on-line content and interaction in a face-to-face event

A few final thoughts about cultivating communities from the 1999 Cluetrain Manifesto that are still relevant (in fact the whole thing is still relevant and definitely worth reading):

  • Markets are conversations.
  • Markets consist of human beings, not demographic sectors.
  • Conversations among human beings sound human. They are conducted in a human voice.
  • Whether delivering information, opinions, perspectives, dissenting arguments, or humorous asides, the human voice is typically open, natural, and uncontrived.
  • People recognize each other as such from the sound of this voice.
  • The Internet is enabling conversations among human beings that were simply not possible in the era of mass media.
  • Hyperlinks subvert hierarchy.

Related posts:

Update Dec 15: I will be on a panel at IEEE-CNSV on “Four Approaches to Marketing” on January 20 addressing this topic. There is no charge for the event. It starts at 7pm at the KeyPoint Credit Union on 2805 Bowers Ave., Santa Clara, CA 95051.

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