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.”
J.R.R. Tolkien in The Fellowship of the Ring

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

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.

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

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.

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