Venture Adventure

Recently, Roger Ehrenberg published his post mortem on his experiences with Monitor110.

Roger’s top-seven mistakes:

1. The lack of a single, “the buck stops here” leader until too late in the game
2. No separation between the technology organization and the product organization
3. Too much PR, too early
4. Too much money
5. Not close enough to the customer
6. Slow to adapt to market reality
7. Disagreement on strategy both within the Company and with the Board

There’s many things that can be discussed and learned by looking at the details of this list.  But when I look at it from a very high level, it all points to 2 major issues — A lack of planning and a lack of leadership.

“Battle is a highly fluid situation. You - You plan on your contingencies, and I have. You keep your initiative, and I will. But what you don’t do is share command. It’s never a good idea.” — Vic Deakins (John Travolta), Broken Arrow, 1996

And this, to me, is a symptom of the web 2.0 mentality of creating a business web-site based on a high concept pitch with no plan and no real leadership.  I guess when the VC is only investing a few hundred thousand dollars, it really doesn’t matter.

But real businesses have an idea of who their customers are, what the customer wants, what the customer is willing to pay, and how the business will make money.  And all of this is known before a single penny is spent.

And real leaders lead!

Edit 1: Fixed Typos

Time can be a real pest when it flys by without you noticing it.

Some time soon (I hope) I’ll be back to writing….

There has been a lot of talk recently, particularly by Obama and the democrats in Congress for re-enacting a Windfall Profits tax on the oil industry. But what exactly are windfall profits and how does this apply to the startup entrepreneur?

The Economist defines windfall profit as a controversial concept, often used by politicians to justify imposing a TAX on PROFIT that in theory is earned unexpectedly, through circumstances beyond the control of the company concerned, and is thus deemed undeserved and ripe for the taking by the tax authorities.

Does this definition fit the current situation? Clearly, the tax authorities (Congress and the Democratic Candidate for President) want to take the profit. And clearly the authorities believe that the profit is undeserved. Many of the proponents of the current proposals for windfall taxes on oil have been claiming that Chevron or Exxon are making $1300 a minute in profit, or a billion a day, or many other shocking claims on the absolute value of the profit. And, if you’re not involved in big business on a day to day basis, the numbers are really, really big.

But are the authorities, particularly Obama and the Democrats, correct?

Here’s a basic analysis using the 2008 Fortune 1000 list.

• Ranked by Revenues, only 2 Oil companies make the top 10. Wal-Mart ranks #1 at $6 billion more than Exxon Mobil. The only tech company AT&T at #10.
• Ranked by Profit, only 2 Oil Companies make the top 10. Exxon-Mobil ranks #1, but GE takes #2 before Chevron’s #3. In tech, Microsoft ranks 6, and AT&T 9.
• Ranked by Net Margin, no Oil companies make the top 10. Exxon-Mobil, with 10.9% margin ranks 219. Chevron, with 8.9%, ranks 298. This compares to Microsoft (27.5%) at 25 and Google (25.3%) at 34.

It will take a long time for a startup or entrepreneur to make the F1000. However, high-tech businesses do have high profit %. Looking at the % ranking, we see Mirant, an electricity generator at 70.9%, which may be an outlier, as the next in rank is Blackstone, in the PE business, at 53.2%. Gilead Sciences, at #7, is at 38.2%.

When I created the financial model for my business, I calculated a 39% net profit long-term. Looking at these figures, I don’t find it completely out of the question. Of course it’s aggressively high. But if I don’t shoot for that goal, I’ll never create a real business.

On the other hand, it is pure hubris for Congress to go after the oil business, and to not, at the same time, attack GE, Bank of Ameria, or the Oracle of Omaha.

The Rankings

Top 10 Gross Revenue

Top 10 Net Profit

Top 10 Profit %

Jerry Weissman’s Book Presenting To Win is an excellent reference for creating presentations, and killing what Jerry calls MEGO: Mine Eyes Glaze Over.

This book was recommended to me some time ago by Jim Long of Gabriel Ventures during an SVASE Event. I finally got around to reading it, and can see that it will be an excellent reference. I’ll probably have to by the Kindle version as well, so that I have it with me to show others.

The book has three basic sections, although it’s organized into 14 chapters. The first section is an intro, covering both Weissman’s background as well as why you need to create better presentations, and, most importantly, WIIFY. No, that’s not a Nintendo reference; it’s an acronym for What’s In It For You, which is the motivation factor that makes people pay attention to the presentation.

The second section discusses brainstorming and organizing your presentation into a story with one of the 16 possible flows:

1. Modular
2. Chronological
3. Physical
4. Spatial
5. Problem/Solution
6. Issues/Actions
7. Opportunity/Leveratge
8. Form/Function
9. Features/Benefits
10. case Study
11. Argument/Fallacy
12. Compare/Contrast
13. Matrix
14. Parallel Tracks
15. Rhetorical
16. Numerical

The discussion on the flows and their uses is very helpful. Weissman’s layout of brainstorming and how to turn it into a story is very intriguing but lacking in some details. I wish he expounded more on this, as it is the hardest part of creating a presentation (and probably the hardest to explain in words, so I do give him a little leeway…)

The third section is the technical nuts and bolts. Rather than discussion typography, Weissman refers to the latin phrase de gustibus non est disputandum - there’s no arguing taste. Instead, he gives a small discourse on perception psychology. Because we read from left to right, things coming in from the left are natural and things coming from the right are unnatural.

I can see where this will be one of those books that needs to be revisited from time to time for a refresher course.

While commenting on the The Future of Storage blog post Does Anyone Care About Efficiency Of Storage?, I starting thinking about all of the different customers involved in a single sale. Since the impetus (and my company) surround storage, we’ll focus on this product and market.

The Setup

Generic product

A NAS (Network Attached Storage) Solution with 10 TB of storage.

Generic Customer

A small enterprise - 1500 employees, a corporate data center, corporate IT staff

The Customer List

IT Staff

The IT staff has specific technical requirements for the product, the management of the product, and the integration of the product into their production environment. Quite often, they have relationships with other storage vendors that have to be broken in order to make the sale.

CIO

The CIO has to ensure that the generic solution (NAS) as well as the specific solution (us as a vendor) meet with all the strategic goals of the company - long term, financial, number/size/type of vendors, etc.

COO

The COO has to ensure business continuity, and has to be convinced that installing and integrating a new storage system will not cause any interruptions to the corporation’s work.

CEO & Board of Directors

Depending on the storage vendor and the type of customer, 10TB NAS solutions can cross the border from discretionary and departmental budget spending to corporate capital asset purchases. In this case, the CEO & BoD have their own set of objectives and objections that have to be met.

End Users

The end users may often have different requirements from IT for storage. For most end users, storage is a commodity on with the same value as pens and paper. As long as it’s there, we can get our job done. If we run out, then the work quickly grinds to a halt and there are a lot of very unhappy end users. Also, like pens and paper, end users perceive storage to be infinitely cheap, and therefore in complete abundance. Rationing of storage is not appreciated nor tolerated very well.

While end users are almost never included in the purchase process, if the end user expectations are not met, negative brand associations may result. For example, if, during the transition of files from the old storage system to the new storage system results in lost or corrupt files, the end users are very quick to blame the new stuff, as the old stuff was perceived to “just work”.

It is important for a new storage player to ensure that they meet with all the customers and determine their expectations for the system. Failure to meet expectations, even with a “successful” engagement, will quickly drive the Customer Lifetime Value to Zero.