Many entrepreneurs who are naturally optimistic make a serious mistake in discouraging pessimistic thinking instead of putting it to good use. The clever utilization of constructive pessimism is one of the keys to success.
The targets that founders set for a startup, and the metrics they choose to measure their progress toward these targets, are key decisions in the definition of the business. The wrong targets–in particular selecting only targets that are easily achievable–will not only postpone difficult choices that will bring clarity but may doom a team from the beginning if they don’t adjust and aim for outcomes that create a sustainable and growing business.
Tequity advises software and technology companies on how to get the best valuation from strategic buyers with a good cultural fit in an acquisition.
Be clear with customers about what is on your product roadmap. We recently did some win/loss interviews for a client to collect stories on why a customer purchased–and why a prospect failed to purchase. When we asked one customer about the quality of their support we got an answer that was initially a little surprising: “We like them because they always come back with an answer even if that answer is no. Other vendors will either talk about a feature being ‘under consideration’ or ‘on the long term roadmap’ or ‘we are still evaluating how best to implement it’ but you tell us no. We may not like the answer and we may sometimes argue but it’s much more honest and useful than most of the feature request answers we get from other vendors.”
I was reminded of that when I got an email today from someone at Peet’s trying to obfuscate the fact that they had discontinued a number of their teas.
Recently, we worked with a startup on team building as they wrangled with the rapid growth of their business. They needed bring on new team members and wanted them to be productive and effective as quickly as possible. Working with the leadership team we reviewed Bruce Tuckman’s four stages of team development.
We are offering our “Getting More Customers” workshop 9:00am-1:30pm on Sat-Apr-23-16. Spend a morning working on your business with a mix of lecture, discussion with peer entrepreneurs, and reflection and writing. You will leave with a plan for getting the phone to ring and your inbox to fill with inquiries.
As entrepreneurs we need to pay attention to the details that matter but to achieve even modest growth or scaling we also need to use delegation. We need to allow other team members to contribute their own strengths, experiences, and insights to the project at hand.
SKMurphy December 2015 Newsletter
This blog post summarizes our December newsletter, you can subscribe to the monthly SKMurphy newsletter using the form at the right
Retrospectives, Post Mortems, and After Action Reviews
The end of year is always a good time to look back and assess what you have accomplished and what you have learned doing so. This goes by several names: retrospectives, post mortems, and after action reviews being the most common. If you kept a copy of the goals you set for yourself for the year, comparing that list with your list of accomplishments may offer further opportunities for insight.
LinkedIn allows you to post a professional profile and accept professional recommendations, and perform searches of the professional profiles of others you are considering doing business with. But with groups and posts it aspires to host content and be your first stop every morning. The risk is that it can become a time sink.
It’s easy to mis-assess who your real competition is. We worry the most about competition that cares deeply.
“You’re competing against people in a state of flow, people who are truly committed, people who care deeply about the outcome.”
Seth Godin in “Texting While Working“
We recently helped a client frame the exploration of an opportunity for acquiring a small software firm. Here are some questions to consider if you are contemplating the sale or acquisition of small software company.
I remember first learning the principle that leaders eat last from John K. Russell, an advisor on a summer Presbyterian workcamp in Westpoint Mississippi. He had been an officer in the Army and talked about how the officers had nicer silverware and napkins but it was the same food and they ate after the enlisted men. Simon Sinek uses that principle as a point of departure–leadership as a combination of higher status and service. His description of leadership reminded of Goethe’s maxim “A man is really alive only when he delights in the good-will of others.”
There is such a thing as the “visible future.” The seedlings of [future] life are sprouting all around us if we have the wit to identify them. Most significant changes are preceded by a long train of premonitory events. Sometimes the events are readily observable.”
John W. Gardner “On Leadership”
Marcelo Rinesi advised “the future is an illusion, all change is happening now” and Peter Drucker told us to “systematically identify changes that have already occurred.” From an entrepreneurial perspective you can often transplant a solution from one industry to attack a similar problem in another: as William Gibson suggests, “the future is already here, it’s just unevenly distributed.” This model for innovation brokerage requires that you be open to new solutions to old but pressing problems and that you scan more broadly to find them. Gardner offers his own explanation for why opportunities are overlooked:
“…the future announces itself from afar. But most people are not listening. The noisy clatter of the present drowns out the tentative sound of things to come. The sound of the new does not fit old perceptual patterns and goes unnoticed by most people. And of the few who do perceive something coming, most lack the energy, initiative, courage or will to do anything about it. Leaders who have the wit to perceive and the courage to act will be credited with a gift of prophecy that they do not necessarily have.”
John W. Gardner “On Leadership”
There is always a value in closing the deals that are in front of you and making this month’s payroll. But there is a risk in getting caught in the treadmill of the urgent. Gardner offers a prescription for leaders and leader/managers to differentiate themselves from managers trapped in the immediate crisis.
- They think longer term—beyond the day’s crises, beyond the quarterly report, beyond the horizon.
- In thinking about the unit they are heading, they grasp its relationship to larger realities—the larger organization of which they are a part, conditions external to the organization, global trends.
- They reach and influence constituents beyond their jurisdictions, beyond boundaries. In an organization, leaders extend their reach across bureaucratic boundaries—often a distinct advantage in a world too complex and tumultuous to be handled “through channels.” Leaders’ capacity to rise above jurisdictions may enable them to bind together the fragmented constituencies that must work together to solve a problem
- They put heavy emphasis on the intangibles of vision, values, and motivation and understand intuitively the non-rational and unconscious elements in leader-constituent interaction.
- They have the political skill to cope with the conflicting requirements of multiple constituencies.
- They think in terms of renewal.
John W. Gardner “On Leadership”
I think this is a good list, even for bootstrappers who are worried about keeping the lights on this month. You have to devote 10-20% of your time to problems in the longer term, and connections and initiatives that may not bear fruit next week but perhaps in three months or a year or two. The last suggestion, to consider how to renew skills, relationships, and shared values, is also a critical one for the long term.
More on Drucker’s suggestion for sources for innovation:
“Innovation requires us to systematically identify changes that have already occurred in a business — in demographics, in values, in technology or science — and then to look at them as opportunities. It also requires something that is most difficult for existing companies to do: to abandon rather than defend yesterday. ”
Peter Drucker in “Flashes of Genius“
Related Blog Posts
I believe that Patrick Steyaert’s Discovery Kanban offers a critical perspective on how large organizations can foster the proliferation of lean innovation methods beyond isolated spike efforts or innovation colonies.
I think Patrick Steyaert has come up with an approach that builds on what we have learned from customer development and Lean Startup and offers an orchestration mechanism for fostering innovation and operational excellence. I think this will prove to be a dynamic approach to managing innovation that will be as significant as:
- Saras Sarasvathy’s Effectual Entrepreneurship Model
- Clayton Christensen Innovator’s Dilemma and Innovator’s DNA
- Ron Adner’s Wide Lens
I believe it’s going to become part of the canon of accepted principles of innovation because it offers not only a way to frame the challenge of balancing discovery and delivery, but a mechanism for planning and managing them in parallel.
Discovery Kanban is a synthesis of a number of distinct threads of entrepreneurial thinking–Lean Startup, Kanban, OODA, PCDA, and Optionality–into an approach that helps firms address the challenge of executing and refining proven business models in parallel with exploring options for novel business opportunities. The reality is that you have to manage both current execution and the exploration of future options whether you are in a startup that is gaining traction and needs to develop operational excellence (or an innovation colony that now wants to influence the existing enterprise) or and enterprise that needs to avoid the “Monkey Trap” of escalating investment in a business model that is reaching the end of life instead of parallel exploration of a number of options for new business units.
At the extremes startups are viewed as scout vehicles–suitable for exploration to find sustainable business models–and established enterprises are viewed railroads, very good at moving a lot of cargo or passengers along predetermined paths. The reality is that almost all businesses need to manage both excellence in execution while not only keeping a weather eye on new entrants fueled by emerging technologies and disruptive business models but also exploring for adjacent markets that can leverage their established competencies and new competencies required by current customers.The Lean Startup and Customer Development models have fostered a broad understanding of the need for iteration and hypothesis driven product probes. Kanban models have shown the value of making work visible to enable the shared understanding that makes cultural change possible.
Dan Scheinman (@dscheinm) graduated from Duke Law School in 1988 and went to work as an associate at DLA Piper before joining the Cisco legal department. Once inside he worked his way up to General Counsel, then ran corporate development which included managing minority investments and acquisitions, and finally was general manager for Cisco’s Media Solutions Group before striking out on his own in 2011 as an Angel investor with an unusual–for Silicon Valley–investment thesis: supply “seed plus” financing to entrepreneurs with track records (another way of saying “over 35”). From his Angel List profile:
I am looking to fund great companies who are going to run out of seed money but are not ready for the A round yet. Operationally useful (helped Cisco go from 80M in sales to 40B), but also useful at ground zero. Invested/on boards at Tango, Arista, Zoom and more. To date, have funded 7 companies.
Sarah McBride profiled him in December 2012 with “Moneyball, valley-style: Investor uses age bias to advantage, funds older entrepreneurs,” noting:
When he started looking around for start-ups in which to invest, Dan Scheinman noticed something: twenty-something entrepreneurs building Internet companies usually had a much easier time lining up early financing from venture capitalists compared to their forty- and fifty- something counterparts.
Age bias, increasingly acknowledged as a widespread phenomenon in Silicon Valley, has created opportunity too. “I was so excited you would not believe when I saw the pattern,” Scheinman, the former head of mergers and acquisitions at Cisco Systems (CSCO), recalls.
Scheinman generally invests $50,000-$250,000 as part of a $1-$2 million funding round. He takes an active role, helping to line up other investors, generally taking a board seat, and providing strategy advice. Scheinman says he is pro-entrepreneur, no matter the age, but finds it easier to invest off the beaten track.
Scheinman elaborates on his strategy in a January 2013 profile by James Grundvig: ” ‘Moneyball’ Comes to Silicon Valley: What Technology Investor Dan Scheinman Sees”
“Venture capitalists of Silicon Valley won’t invest in founders who are more than thirty-five years old. They don’t do it. Knowing that, I look at being a contrarian — an opportunist — to find opportunities where the herd isn’t,” he said.
“A typical venture capital firm will look at 1,000 business plans each year. They will invest in fifteen of them. They are trained for pattern recognition. By reviewing so many (startups) they see common patterns on which type businesses should succeed,” Mr. Scheinman said. “But there’s a problem.
“I sat on a venture capital pitch before. Some entrepreneurs don’t pitch well. But instead of engaging them, those in the room looked away. I realized I had to go to the source and ask questions. Go deep. Assume nothing. Look beyond the pattern for bigger returns,” he answered. “Like in Moneyball, I look out of pattern. That includes founders who are more than thirty-five years old.”
Noam Scheiber also talks to Scheinman as part of his research on “The Brutal Ageism of Tech:Years of experience, plenty of talent, completely obsolete?”
Though he had ascended to head of acquisitions at Cisco during his 18-year run there, he always felt as if his quirkiness kept him from rising higher. His ideas were unconventional. His rhetorical skills were far from slick. “I’m a crappy presenter,” he told me. “There are people in a room whose talent is to win the first minute. Mine is to win the thirtieth or the sixtieth.” Back in the early 2000s, he proposed that Cisco buy a software company called VMware. It did not go over well. “Cisco is a hardware company,” the suits informed him. Why mess around with software?
Most Silicon Valley investors, he came to believe, were just like the suits at Cisco: highly susceptible to “presentation bias” and, as a result, prone to shallow conventional thinking. “Paul Graham”—the founder of Y Combinator, the world’s best-known start-up incubator—“says the most successful [investor] makes his decisions in twenty-four hours,” Scheinman told me dismissively. It was time to set off on his own.
The only question was what to invest in. “I could see the reality was I had two choices,” Scheinman told me. “One, I could do what everyone else was doing, which is a losing strategy unless you have the most capital.” The alternative was to try to identify a niche that was somehow perceived as less desirable and was therefore less competitive. Finally, during a meeting with two bratty Zuckerberg wannabes, it hit him: Older entrepreneurs were “the mother of all undervalued opportunities.” Indeed, of all the ways that V.C.s could be misled, the allure of youth ranked highest. “The cutoff in investors’ heads is 32,” Graham told The New York Times in 2013. “After 32, they start to be a little skeptical.”
I think the idea of working with older investors on seed plus gives Scheinman several opportunities and creates several risks:
- Longer track records, easier to do due diligence on them as people and managers.
- Older entrepreneurs may see risks more clearly than opportunities but probably better able to execute in the face of setbacks. They are probably better able to dodge some potential setbacks
- Less competition for the deal, potentially a friendlier or at least less adversarial relationship
- Funding amount is commonly sought but not often available, less competition more demand
- Because these are “undesirable” Scheinman will have to help them to transition from “not a good idea” to “numbers are so good how did we miss this.” He will lose the benefit of the doubt going with older entrepreneurs for follow on funding (e.g. an A round after seed).
- Unless he is “last dollar in” (which may also be deals worth searching out) he needs a clear plan to support the team for what they will need for a follow on “A round” presentation at time of funding.
- Three Advantages of Older Entrepreneurs in B2B Startups
- Three Advantages of Younger Entrepreneurs in B2B Startups
- Serious and Competent People
- on “seed plus” see
“Don’t take business advice from people with bad personal lives.”
Frank Chimero “Some Lessons I Learned in 2013“
One of the hallmarks for success in a business-to-business market is the ability to form personal relationships as well as professional business relationships. Both require building trust. I am always dismayed when I read advice that advocates bait and switch or other forms of con games that erode trust and make it difficult for any startup to build relationships.
Let’s face it, finding customers can be quite a challenge. In this interactive workshop, we will cover a variety of proven marketing techniques for growing your business: attendees will select one or two that fit their style and develop a plan to implement them in their business in the next 90 days.
- Speaking – small groups, large groups, conferences, …
- Writing – blogging, newsletters, articles, …
- What Other People Say About You – referrals, testimonials, case studies, …
- Getting Found When and Where Prospects are Looking: adwords, Craigslist, trade shows, SEO/SEM, …
March 25, 2014 9am-12:30pm
$90 includes lunch
“This workshop provided great material to bounce off of. SKMurphy created a fertile space for me to think about my business and plan a concrete step forward. Thank you.” Paul Konasewich, President at Connect Leadership
Thinking about this using an OODA loop model – — Observe -> Orient -> Decide -> Act
- Orient part is sensemaking — its own kind of fast learning
- Often takes a long time in a complex situation (e.g., all situations where learning is involved); subject to error because it’s “culture bound”
- What we do
- Asking what you see
- Asking what are interactions (including between people, process, platform, and practices)
- focused on asking good questions / suggesting questions to research; avoid giving advice
- Audience: other entrepreneurs
Presenter profiles (see extensive write up a “Semifore Execs Share Bootstrapping Lessons and 2014 Scaling Up Plans at Jan-17-2014 MVP Clinic)
- Robert Callahan, COO Semifore, Inc.
- Herb Winsted VP Business Development and Customer Care, Semifore, Inc.
- Semifore, Inc: niche software player in Electronic Design Automation founded in 2006 with a focus on tools for memory map management
- How do we scale and grow the business
- What strengths or accomplishments will you build on
- What existing or constructed vantage-points (data-collection opportunities) have been or will be most useful?
- What capabilities need to be developed
- What’s the primary barrier or key challenges you need to overcome
- talk about product and challenges – cross functional nature
- talk about what you have learned – making sense of current experience
- look ahead 2014 talk about plans
- complex sales environment
- education / learning involved
- many prospective clients have rolled their own
- side issues = standards, interaction with purchasing
- Usually find a pre-existing culture / product team / team
- more complex sales and adoption problem
- touches hardware team (e.g. system architect, RTL developers)
- software developers
- documentation specialists
- documentation consumers – e.g. verification and validation team
- plus “team in larger team or org issues”
This is a mid-course correction conversation. We have a viable product that’s now robust
How do you scale the business?
Competitors are “in-house” solutions – first generation build out. Semifore product replaces spreadsheets and in-house Perl scripts that represent a career path for internal tool developer
Questions from Audience
Q: How many employees does Semifore have?
A: five direct plus some other outsource teams we draw on for specialized resources
Q: Do you monitor feature usage and see which ones are used and which ones are not? Do you remove unused features?
A: it’s on-premises software, there is no monitoring except in conversation with customer. Will be deleting some obsolete standards but have to provide a lot of legacy support and backward compatibility
John observed: consider inserting learning & feedback loops here.
Q: Do you have any services revenue?
A: We have a hybrid license. basic level charge, tiers of users (groups of 10). we sell licenses in batches of 10 with a decreasing cost per incremental seat even as total site license fees go up. We have some project support service fees; there are also fees for “global license”
Q: Tips for growing from small groups to more users in the companies. How to encourage spread inside customer
A: We believe the following have been key to our success:
- spend face time with customers
- dealing with the internal script-writers “who can do stuff.”
- sales opportunity: when the script-writer leaves
Q: What percentage of customers did you have pre-existing relationships with (from Magma, as an ex-employee of that company, etc.)?
A: really only first customer, most of the rest were “cold starts”
Q: Also, is the tool compelling to any functional area as is, or is it compelling primarily because there’s a lack of resources for the previous internal approach?
A: a bit of both. solutions exist in organizations that are not visible to management.
Notes from Live Session
Walking around the issues —
Rob: in the Valley back when disk drives looked like washing machines. Finance roles, then managing channel and tech support. EDA for last 15 years. External advisor to Semifore, joined the firm a couple years ago. growing the business from boutique to a real business.
Herb: business development VP — customer facing activities. started in the electronics business back in the ’70s. Projects in Europe, Japan, US, involved with Semifore since 2008. Semifore is the “right size” for connecting directly to customers.
Have both survived and added customers. Tool crosses several different disciplines, enabled by high level
Some standards IPXACT and System RDL but for the most part replacing either custom scripts or Excel input based techniques.
Rich Weber drew on experience at SGI, Cisco, Stratum One to create cross-compiler
selling to sw, firmware, and documentation teams proliferating from early beach heads
Respond to customers quickly. agile response. Keeping customers.
Initial sell to a small team. from 10 users to 100 in the same company. tool goes viral. education challenges to begin using the tool. Support requests are often enhancements to connect with their local requirements.
How to proliferate. Getting information early in the design / development process. Measure speed. Perceiving the activity outside “my silo.” It’s a blazingly fast product once it’s in place.
Q: does tool help to measure design cycle impact?
A: It’s really a technology driven company working with engineers who focus primarily on technology, but our customers live in a business environment. more recently customers are coming in and asking for automation of the creation of these architectural descriptions. Once the tool is adopted there is a shift from create the “perfect document” to ‘good enough distributed widely’.
Semifore enables a start from a terse description that can be elaborated. EDA Process Workshop in Monterrey – need a good plan more than a good tool
Herbie: Making the transition from supporting a wide variety of design styles to a smaller subset that the industry as a whole seems to be converging on.
Sean: similar to what happened in networking where there was a convergence from “multi-protocol” to IP and Ethernet.
As an introduction strategy Semifore offers a sandbox model.
John: have you thought about a user conference where you can share lessons learned and foster “viral process”?
- Rob: good idea, we could do it in the Valley
- Herbie: one challenge is a lot of our customers are direct competitors and don’t allow us to talk a lot about what they are doing or even that they are using it.
- John: breakfast at Coco’s might actually kick this off; talk about failure as much as glossy success. provides access to design ideas and source of marketing insights.
- Sean: first Verilog user group was very low key. It was at Denny’s.
Rob: engineer to engineer conversations have been of great benefit, but we have trouble translating that into business impact.
- Sean: boiled frog problem- registers grow incrementally. complexity …. how to trigger the epiphany that “it’s getting hot”. how describe the environmental question about increasing complexity.
- Rob: we see people saying “we can’t manage any more. please help”
- Sean: need to crystallize this customer’s business insight into tools for engineer customers at other firms (including prospects) into a compelling business proposition. Problem has scaled from hundreds to tens of thousands of registers
Sean: What is one thing that would change the equation:
- Herbie: go to next level in revenues. A potential contract on the horizon would generate more human resource.
- Rob: finalize and accurately describe tool functions, so can present / educate people at higher levels of the organization..
Q: What is your licensing model?
A:business predicated on one year licensing deals, renewals are based on internal uptake not multi-year contractual obligations. Avoids some issues where customers wait for end of quarter/year asking for large discounts
John: your great strength is your engineering view, but is this in some ways a weakness? Could you do more to see into the customer organization w/o more revenue?
Rob: A senior VP engineering has a P&L and a business view. We are a small tool in price, it’s hard to get their attention.
- Herbie: this session was out of our normal activity. appreciate opportunity. learned working inside orgs & managing projects: the reality of business situation, putting together the fifth team.
- Rob: better mousetrap doesn’t always sell. Semifore has good technology. challenge is to refine the messaging. describe “breakage is around the corner.”
- Sean: need to explain to prospects that they have gotten used to dealing with “broken”. I think Semifore’s challenge less in engineering more making business case to pragmatic buyers.