Who is your vc?
John H turned me on to a post from Investments and More titled VC’s – Top Brass Solid, Others Not (“wow – someone taking the glam out of the VC world,” he writes). I actually found his post pretty amusing. While I think a lot of people at venture firms are fantastic (law of natural selection, I guess) there are, of course, some that are better than others. What Steve’s post did bring to mind was how important it is to recognize that when you take on an investor you’re taking on an individual more than you are taking on a firm. Some firms have more cache than others, but at the end of the day as an entrepreneur you work with a person, not a fund. Sure, individual partners get to call on the expertise (and rolodexes) of the other partners in their fund, but firms don’t attend board meetings or strategy sessions, give feedback or pick up the phone to talk with you – an person does. …
July 19, 2005· 1 min read
Changing styles . . .
Brent wrote in recently to remind me that I wrote in M&A Part I – Lines in the Sand that I’d talk a bit about changes in my negotiating style over time. I actually interested to hear if other people have had similar experiences, because what I’m about to describe both seems like a natural progression and might also be termed ‘growing up’. I had an odd introduction to more formalized negotiation a few months into my first corporate job after leaving Wall Street. The company I worked for decided to embark on a few acquisitions and I was assigned to work on these with my boss who was the head of the business development group. Eventually we settled on our first deal and, after negotiating the purchase price, my boss turned to me and said something to the effect of “go get it done.” Disappointed that I didn’t get to participate in what I thought was the real action I accepted my role as the grunt on the deal and started work on processing the deal. Much to my surprise at the time it turned out that negotiating the price was about 5% of the actual deal and there were lots of other terms to be worked out. I had the great fortune of working with an outstanding lawyer (who I’ve since done several dozen deals with over the years) who took sympathy on this (at the time) 23 year old who knew nothing of either negotiation or m&a deals. My initial negotiation style arose out of these circumstances and was at the same time defensive (I didn’t want to admit when I didn’t understand something – which happened pretty often – and I understood nothing of the nuance of the terms I was negotiating) and brash (I didn’t fully understand the give and take nature of negotiation and thought I needed to ‘win’ on everything). I learned quickly (and in a few cases embarrassingly) that this style wasn’t going to get many deals done, but in thinking back on this period of my life realize that I maintained a somewhat brash style to negotiating deals (both m&a and business development) for quite a while (my original boss was promoted and I ended up working for someone who was more involved in the day-to-day details of the deals we were doing but who was also very harsh in his personality and negotiating style, which I think I picked up to some extent). …
July 19, 2005· 4 min read
Some thoughts on better board meetings
I sit through a lot of board meetings and while they are a great time for a company to harness the expertise of the people sitting around the table, they need to be structured and managed in such a way to actually accomplish that (i.e., effective board meetings don’t just happen – they are the result of planning and careful management). I sometimes joke with my dad that it must be tuff to get a word in at his board meetings given the powerhouses around the table; he just laughs and tells me that they prepare for their board meetings carefully. In actuality, I think he get a huge benefit out of his board – as do many of the companies I’m involved with – by doing exactly that. Here are a couple of quick thoughts on what that kind of planning and preparation might look like. Send out the board package in advance (a week is great; minimum is a couple of days). This allows you to set up an expectation with your board that they will have all read your board package carefully (which they should do, but won’t always be possible if they get the board package at midnight the night before the meeting). The board package should be comprehensive and cover updates from each department. Include a CEO letter or overview at the beginning of the package. This gives you the chance to set the tone for the meeting – setting up topics that you plan to dig into deeper and asking people to think about certain areas of the business for further discussion at the meeting. Since the board package is also probably pretty thick and full of data this gives you the chance to set the lay of the land for the board (very helpful) and point out specific things that you’d like to highlight in the package. Do not review the entire board package at the meeting. If you are sending out your board package in advance of the meeting and the package is comprehensive by department you should not feel the need to review the entire package (since everyone will have read it). Pick the highlights you want to cover; point out specific items that you’d like to bring the board’s attention to (presumably you’ve done this in your CEO letter as well); ask if there are any questions about the material. But please – don’t spend hours at board meetings reading every page of the package; if you work up a separate presentation to guide the board meeting itself, don’t feel like you need to stop on every page. Many of our companies like to focus on one strategic area of the business at each meeting and prepare a separate presentation to guide that discussion. I think this is a great idea. Make the presentation no more than ½ hour and be sure to make it strategic rather than tactical in nature. …
July 18, 2005· 6 min read
Toys
Here’s some stuff I’ve been playing with that I’ve been meaning to post about: First is MyBlogLog, which tracks links people follow from my blog site. It also tells me how many page views were served from my site. Since I serve full feeds this doesn’t capture all of my link traffic (I miss everything that isn’t clicked directly from the site itself), but I get enough direct site hits to extrapolate these data to my subscriber base. If you want you can also put up a chicklet on your site that shows your most popular links. It’s easy to set up (you have to embed a small amount of code on your site) and intuitive to use. Some more flexible reporting and perhaps different UI for reports would be helpful, but I’m sure Eric is working on those. If you blog and you care about user stats (what am I saying – all bloggers care about their user stats!) this is a great tool to have. I’ve written a few posts (here and here and here) that reference better ways to view information. While the UI of TagCloud is pretty lacking its still a HUGE step in the direction I’m talking about. You can point a bunch of blogs to this tool and it will pick out the overlapping words. Yah – this needs a NLP engine to really be useful and pull out full concepts rather than single words. Still it’s a great idea. Now they just need to make it look more like this. (thanks to Walker for pointing me to this site) …
July 8, 2005· 2 min read
How cool is your ride?
Even though I’m getting older I still like to think of myself as at least a little bit cool (although I’m sure there are many people who would set me straight on that one). As a result I was a bit dismayed this weekend to read an amusing article in the Times that clued me in that – at least in my choice of cars – I was not as cool as I thought I was. In fact, the Land Rover that I drive is pretty close to the “Stodgy” end of the cool meeter and in the same category as Chrysler and (gasp!) Oldsmobile. As the kids would say these days: “Not so groovy!”
July 6, 2005· 1 min read
TSA in action
i can’t tell you how much safer i’m feeling now. i’m writing this on a flight from denver to chicago (on my danger sidekick, by the way). i almost inadvertantly took aboard an allen wrench set (in my bag from when i rode my bike to work last week and perhaps the most blunt object in my bag). the fact that i somehow got it with me to chicago in the first place aside, i know i’m much safer now that its been confiscated (apparently under the ‘tools’ clause of the tsa’s list of banned items). if not, right now, someone could have taken the set and be using it to LITERALLY dismantle the plane. . . …
July 5, 2005· 1 min read
Networking 101 Expanded
Josh Kerbel wrote me with a good question to my Networking 101 post and my follow up post to that one Here’s how you do it that I thought I’d post along with my response (with his permission). Josh Writes: A while back you wrote a post about networking and you referenced Ben Casnocha as an example of a great network, the type of guy who writes people letters and goes out and meets them. …
July 5, 2005· 4 min read
Gnomdex Redux – As if you where there
Sorry – meant to have this one up a little more proximate to the actual event . . . You go to Gnomdex? Me neither. I was bummed I missed it, so I spent some time rummaging around on Google and Technorati looking for some links. Here’s a few that I found that, while they don’t replace the experience of attending in person, at least give you a little bit of the flavor. …
July 4, 2005· 1 min read
Wouldn’t it be great . . .
Wouldn’t it be great if you could subscribe to the comments of certain blogs (or better yet, to certain posts) in your reader? I’m going to add it to my wish list (we’re actively working through these sorts of ideas at both Newsgator and Feedburner). I must have reached some kind of critical mass in my readership where I’m actually getting a reasonable number of comments and trackbacks to my posts. It got me to look at the comments to some of the other blogs that I read (I rarely visit sites directly – rather I read them in Newsgator). Turns out that there are great comments out there that I’m completely missing. The solution for the moment is to click through on posts that I particularly like or think will be well commented to and see what’s posted, but wouldn’t it be great to be able to subscribe to these and read them directly in your reader. In an ideal world you could subscribe to comments for only those posts that you care to see feedback on. Yup – that would be pretty cool . . .
June 23, 2005· 1 min read
M&A – A Corporate Development Perspective
I recently asked my friend Daniel Benel if he’d consider contributing to my M&A series. Daniel was a banker with Lehman Brothers (in NY and Tel Aviv) an is now a corporate development exec at Verint Systems (NASDAQ: VRNT). Despite having never bought one of my companies, he’s a great guy with a smart corporate development mind (rim shot). I thought he could add a corporate development perspective to the series. I’ll make sure he gets copies of any comments that get sent back, or feel free to reach him at the hyperlink attached to his name above.______________ Below are three topics on my mind related to acquisitions from a corporate development perspective (perhaps the beginning of a series): The Hockey Stick Projections – Hockey Stick Financial Projections did not die with the bubble’s burst. Perhaps they were put away in the back of the garage for a while alongside other unloved sporting equipment like that confusing lawn bowling set or the ambitious NordicTrack. Unfortunately, some mischievous banker found the darn things, had them shined up and sent out to technology companies near and far. It is more likely than not nowadays, when I receive a book from a banker selling a technology company, that the financial projections show jaw-dropping out-year growth. The most noted reason for the turbocharged numbers: The Market. The Market is hitting a “sweet spot,” or the company is in a sweet spot and the market is about to develop a sweet tooth. These saccharine solution sellers expect, of course, to be valued off of forward numbers. My common response to wild growth projections is to advise the company not to sell. If management of a selling company believes that they can accelerate growth dramatically over the next 12 months, why don’t they prove the business plan and come back to the merger market with a significantly higher value? At this point in a discussion some sellers choose to revise their outlook. Other sellers claim that the projections are based on “what the company can do on a pro forma basis,” that is, when combined with “your more significant resources.” (I’ll discuss that in the “We Don’t Pay for Synergies” section.) Companies whose sales are truly going to accelerate dramatically, and are selling for a defendable reason, need to back up projections early on with a real sales pipeline/backlog (not a Frost & Sullivan report). Sharing pipeline/backlog data will immediately trigger competitive concerns in the mind of the seller, which is fair and will be discussed further in the “Overboard Competitive Concerns” section. We Don’t Pay For Synergies – Often stated as an acquisition truism, but not always true. In general, it is synergy that motivates an acquirer’s interest in a given target to begin with and not something for which a buyer is willing to pay extra. Synergy is a value that the transaction itself generates and is not produced by a company on a standalone basis. Depending on the transaction, each side may lay philosophical claim to a greater share of this value, but this debate will not affect the standalone valuation an enterprise can demand and is usually a losing negotiation point anyway. That being said, the more synergy a given business combination offers to a buyer, the more that acquirer is able to pay for a business. While an acquirer may not admit to paying for synergies, in a competitive acquisition process, the acquirer with the most significant synergies (all things being equal) could write the bigger check. Sellers should negotiate accordingly with this knowledge in hand. Overboard Competitive Concerns – Acquisitions often occur between competitors. This is natural, particularly in early stage markets that are in a consolidation phase. It is important to recognize that the time it takes to sell a company is correlated to the speed of information sharing. I am not referring in this case to the relationship-building phase that can take months or years, but rather to the moment in a transaction when there is a meeting of the minds between seller and buyer and perhaps a non-bindingMemorandum of Understanding (or other term of art) in place. At this precarious juncture, just when you are tempted to think that some of the hard work has been done and you can put your Blackberry down for the night, sellers can become frozen with fear that all of their competitive secrets will be stolen during the diligence process and somehow abused. Sometimes this happens when they receive a buyer’s diligence request list and it is longer than the federal budget. Sellers must recognize early on that they will have to accept the risk of sharing sensitive competitive information with potential acquirers in order to get a deal done. Some data, though, may be deemed so sensitive that particular work arounds need be put in place in order to make diligence acceptable for both sides. Sometimes a two-stage approach to diligence (deferring highly sensitive material to when the deal feels more certain) can resolve concerns. In this case, it is important to first determine how critical a particular piece of sensitive data is to the buyer’s diligence process. It may be, for example, that the seller believes his source code is something that can’t be revealed to a buyer early in diligence and he therefore stymies a process, when in reality the acquirer might be far more interested upfront in a customer list than in source code (and would be willing to delay source code review to just before signing). …
June 22, 2005· 5 min read