I always thought that spam blacklists were well intentioned but problematic for the email ecosystem, since they are vigilantes in action and have no accountability and trackability. Periodically, I’ve even pondered whether or not they violate someone’s first amendment rights. It’s maddening to know you’re a good guy in the email world, you can get put on a blacklist because some anti-spam zealot decides he or she doesn’t like you on a whim, you can’t complain or get off of the list, you may not even know you’re on the list, then you’re downloaded thousands of times by naively trusting or equally zealous sysadmins, and boom — your emails aren’t getting through any more.

Then yesterday, I was looking at what’s probably the first blacklist for blog comment spam, dubbed by Brad Feld as BLAM. I immediately found myself using it myself to prevent my blog from getting overrun by the newest Internet evil. (Of course, I should be so lucky…my fledgling blog has all of one comment on it, but I’m sure there are scores of people ready to comment at a moment’s notice.)

So here we are at the dawn of a new era: the beginning of the blacklist for blam. I’m an early adopter of Jeff Nolan’s pioneering list and proud of it, which made me rethink my view of email blacklists for about five minutes. It didn’t ultimately change that view — email blacklists still have all the problems I mentioned above and have run amok — but it does make me hope that there’s a better long-term solution for stopping blam than the one the world of email has ended up with. Fred Wilson has some good thoughts on better tools for this as well.

Necessity, as always, is the mother of invention, but hopefully the blam blacklist situation won’t get out of control before someone tries to fix it, which may be too late. What I think we need now to solve the blacklist problem is a blacklist of blacklists, but that’s another story for another posting.

Yesterday’s announcement that Microsoft is going to merge its nascent Caller ID for Email authentication standard with the more populist Sender Policy Framework (SPF) is an interesting development in the war on spam.

But what does it really mean?

It means that sender authentication is headed towards a standard. Where once there were three, now there are two (Yahoo Domain Keys is another standard, although it’s still a little unclear whether it’s competitive or complementary).

Authentication is an important component of the war on spam because it allows ISPs and other email receiveing servers to verify that the sender of the email is who he says he is. Spammers don’t do that.

But authentication is only one facet to the war on spam. The others, at least the way we see them at Return Path, are (in no particular order):

Reputation: Proving you, as a mailer, are a good guy. Low complaints, good email capture policies, working unsubscribe, proper server configuration, and a host of other components.

Monitoring: Understanding how your mailings fare in the real world. Are you being blocked? Filtered? Blacklisted? Greylisted? When? Where? By whom? And most important, why?

Best Practices: Making sure you’re doing things the right way as an emailer, attacking the root causes of complaints and blocking, creating email programs that not only work economically, but work socially as well.

Payment: Ultimately, although I’m not sure what form it will take, someone will have to eliminate the economic free ride problem that created spam in the first place. Translation: mailers will probably have to pay something, to someone, to guarantee delivery.

There was a good piece in the New York Times yesterday about blogging, including some good quotes from Jarvis.

I’m getting the hang of it, but I have to say that blogging in the bathroom is taking things a little bit too far.

I am now a big fan of my new Treo 600. It’s not so new, I’ve had it for a couple of months, but I figured out a couple of things on it today that really throw it over the top in my book.

In general, it’s a very good convergence device. The combination of phone, Palm apps, and email is very well done. It needs a longer battery life, but it lasts for a full day with pretty heavy usage, which is acceptable. I love not carrying around both a phone and a blackberry any more.

The first thing that took it from being a good device to being a great one was our installation of the GoodLink Exchange server software. It is instantaneous, two-way wireless synch between the device and my Outlook profile. That means no docking, never being out of step with changes made to my profile in my office, and full access to all my Outlook folders, not just the inbox.

But what really made the difference for me was that I figured out how to rig the device to also be an MP3 player today. So now, on short business trips anyway, I am down to one device and one battery charger from three and three.

It’s a combination of Pocket-Tunes software on the device, an SD chip, which you can now get up to 1GB of storage (about 300 MP3 files), and an adaptor that connects my computer to the SD chip via USB to load the MP3 files. The sound quality is much better than I expected, although I do miss my ipod, and it plays both through headphones (you need an adaptor for that, too), and outloud using the phone’s speaker capabilities. So you have to do a little work to make it an MP3 player, but it’s worth it!

Now the only thing that has to happen is that Verizon needs to offer service on this device. T-Mobile’s coverage in NYC is awful.

Old news by now, but John Kerry has selected John Edwards as his running mate for this fall’s presidential election. What I found particularly interesting was a line buried in one of the various news reports I read on the web this morning, which said that Kerry, still stinging from the fact that he heard the bad news that he was not to be Al Gore’s running mate in 2000 from the media and not from Gore himself, had kept this decision-making process deliberately private up until the very last moment to avoid making that same mistake and to spare the feelings of those he passed over for the job.

How many of us in business have learned things over the years from negative role models, as much as from positive role models? I actually wrote a comment in an upward review several years back that I learned a ton from observing my boss, but that much of what I was learning was what not to do!

I think negative role models can be an even more powerful influence on leaders than positive role models over time, although both are clearly important. My experience with this tracks this decision of Kerry’s pretty closely — in a particular instance where I apply something learned from a negative role model, I tend to overcompensate for what is usually, in hindsight, a smallish detail. At the end of the day, I feel much better about it myself, and although I generally think it makes a difference, sometimes that difference is lost on others in my organization who don’t have that same benchmark.

Anyway, I hope Gephardt, Vilsack, Richardson, and the other Democrats who were not selected by Kerry today feel good about the way the decision and communication went down — because I know how hard Kerry worked to make them feel good about it!

Katie Hafner’s article in the New York Times Circuits section today about spam and false positives is right on the mark. Spam filters are still evolving, and spammers are evolving right with them. Although the flood of spam is largely stemmed by a good filtering app, the results for consumers are still spotty: false negatives are irritating, false positives can be very painful (as the article suggests), and the process still consumes a little too much time. While the article nails the consumer problem, it does miss the corresponding business problem around false positives (see below).

But things are getting better. While I wrote generally about how email is here to stay a couple weeks ago, there are a couple other things I’d point out after reading Katie’s article that are making the email landscape a brighter place of late:

First, even better than the Bayesian style filters referenced in the article are community-based filters. The leading one is run by Cloudmark and is called SpamNet. SpamNet relies on a community of 1 million hardcore email users voting on whether email is spam or not. I’ve used SpamNet for over a year now, and while it’s not perfect, it’s pretty good at reducing both false positives and false negatives to a tolerable level, and it’s very easy to use (but only with Outlook for now).

Second, a few companies in the email industry — Ironport (Bonded Sender) and Return Path included — are hard at work on solutions to the false positive problem that won’t leave false negatives behind. Once these solutions reach maturity (still 6-12 months away), I think consumers will notice a quantum leap improvement in managing their inboxes.

Finally, one thing I’m always trying to encourage people to realize is that this problem is not just an annoyance for them personally…but it’s an annoyance to legitimate businesses everywhere. Businesses who uses email to reach their customers — when customers request the email — are consistently finding that anywhere from 5 to 50% of their emails are blocked or filtered (with an average of 19%, according to our research). Talk about an ROI buzz kill and a CRM nightmare!

So hang onto those babies out there, consumers and marketers alike…the bathwater really will go down the drain soon!

It’s election season, the GOP convention is literally in my backyard, and while this is not a political blog, I can’t help myself. As we as Americans grapple with the question of who we want to be our next leader (or at least those people who live in the 11 annointed swing states do), I have had a lot of thoughts lately about the question of what makes a good leader, and what the differences are between successful leadership in politics and successful leadership in business.

James O’Toole’s article on President Bush on page 31 of the September issue of Fast Company (no link available yet) brings up a really interesting point in comparing Bush to former president Ronald Reagan. He asserts that “what made Reagan effective and respected was that his actions followed consistently from a positive worldview.” (I’d also argue that the positive worldview as a starting point had something to do with it, but that’s beside the point.) He goes on to say that Bush has an “implementation problem” in that he “has vacillated between contradictory approaches to leadership: realism and idealism.” His central thesis is stated very clearly that

“Realists and idealists can both be effective leaders. But one cannot be both at once…The leadership lesson for GW – and for any leader – is simple: Followers don’t much care if leaders are realists or idealists, but they distrust inconsistency.”

This may or may not be true in the political arena, but I know it’s not true in business. Jim Collins’ watershed books Built to Last and Good to Great — both must reads! — describe the ideal CEO as someone who can simultaneously be optimistic and idealistic about the future of the company while simultaneously recognizing and dealing with the realities of the short-term situation. Ironically for this posting, Collins calls this the Stockdale paradox, after retired Admiral James Stockdale, a military leader and erstwhile vice presidential candidate of Ross Perot in the 1992 election.

As CEO, I have to constantly be selling the vision of the company — what we’re trying to become and how we’re going to get there — in broad strokes to my investors, board, management team, employees, and even customers. It’s that vision that keeps the whole machine running and keeps everyone focused and excited and working hard towards our long-term goals. But I have to be equally vigilant about the mundane realities of the current quarter, making our numbers, containing costs, and running the machine. If I did either one without the other, I think the whole system would break down.

Is Bush’s problem, as O’Toole asserts, that he articulated two different types of reasons for the war in Iraq — one rooted in Realism (WMD) and one rooted in Idealism (freedom and democracy)? Same goes for his states reasons for the tax cut — Realism on the one hand (to stimulate the economy) and Idealism on the other hand (shrink government). I agree that the Bush Administration has occasional implementation problems and doesn’t have nearly the “following” that Reagan and other more successful leaders in the past have, but I don’t think they’re caused by combining Realism and Idealism in the President’s leadership style. I think the leader of the free world has to do both well, each at its appropriate time, in order to be effective at his job.

Next up in this series: Admitting Mistakes.

Angel and Strategic Investors

While I and others have recently done a number of postings on Venture Capital investors and their relationship with entrepreneurs, I thought I’d do a posting on handling other kinds of investors — angels and strategics.

Angel investors. My definition: high net worth individuals who put personal money into a company. The good: they’re typically your friends and family, so they don’t play hardball when negotiating terms. The bad: they’re typically your friends and family, so every dinner party you attend has the potential to morph into an ad hoc investor relations conference. The ugly: you feel awful if you lose their money or dilute them down.

Strategic investors. My definition: operating companies (not investment firms) that invest in other operating companies. The good: they’re typically some kind of business partner, so if they have a stake in your company, they will be more likely to help you. The bad: the person at the comapny who made the investment decision is usually a different person than the person with whom you conduct business, so the incentives are rarely aligned the right way. The ugly: unlike financial investors, strategic investors can change their philosophy about making other corporate investments for any reason or no reason and leave you without support in future rounds and with an unproductive player around the table that makes a future exit difficult by their mere presence.

At the end of the day, not everone is cut out to invest in startups. My biggest takeaways about these two types of non-financial/VC investors are:

1. Be very selective about who you let invest in the early stages of your company

2. Make sure angel investors acknowledge to you verbally (above and beyond the accredited investor rep they give you) that they are totally comfortable losing all of their money

3. Make sure angels and strategics understand that in order to preserve the value of their investment, they may need to continue investing in your company if you end up raising multiple rounds of financing

4. Without being unfair, try to limit the rights (or assign them by proxy to you or to the Board or to a lead investor) of less sophisticated financial investors who aren’t and won’t be close enough to your business to participate in major corporate decisions down the road. Along these lines, you should strongly consider selling both types of investors common stock, especially if it’s early on in the company’s life

Complex Collaborations

I just read a new book entitled Business Without Boundaries:  An Action Framework for Collaborating Across Time, Distance, Organization, and Culture.  I happen to know one of the authors, Don Mankin, who was on our trip to Antarctica last year.  The book is a good, quick read for anyone running an organization that requires any degree of complex collaboration, whether in the form of multiple offices with a single company, close relationships with suppliers or customers or channel partners, or even a joint venture.

Mankin and his co-author Susan Cohen present three case studies:  John Deere, Radica, and Solectron.  They then tie their learnings together into a solid framework that’s almost a how-to checklist for organization leaders to follow.  While the writers take an academic approach, the learnings and framework steps presented are anything but academic — they place a huge premium, for example, on relationship building and communication patterns.  These are all things we’ve worked through over the years at Return Path, whether managing employees across multiple offices  or in working with some of our reseller partners or clients.

All in, it’s a good read — and not just because I hung out with this guy in an igloo for two weeks!

Backwards

I came to an interesting conclusion about Return Path recently.  We’re building our business backwards, at least according to what I have observed over time as the natural course of events for a startup.  Here are a few examples of what I mean by that.

Most companies build organically for years…then start acquiring others.  We’ve done it backwards.  In the first 9 years of our company’s life, we acquired 8 other businesses (SmartBounce, Veripost, Re-Route, NetCreations, Assurance Systems, GasPedal Consulting, Bonded Sender, Habeas).  Since then, we’ve acquired none.  There are a bunch of reasons why we front loaded M&A:  we were working hard to morph our business model to achieve maximum success during the first internet downturn, we knew how to do it, there was a lot of availability on the sell side at good prices.  And the main reason we’re not doing a lot of it now is that there’s not much else to consolidate in our space, though we’re always on the lookout for interesting adjacencies.

Most companies tighten up their HR policies over time as they get larger.  We’ve gotten looser.  For example, about a year and a half ago, we abolished our vacation policy and now have an “open” system where people are encouraged to take as much as they can take while still getting their jobs done.  Or another example is an internal award system we have that I wrote about years ago here.  When we launched this system, it had all kinds of rules associated with it — who could give to whom, and how often.  Now those rules have faded to black.  I’d guess that most of this “loosening up” over time is a vote of confidence and trust in our team after years of demonstrated success.

Most companies start by investing heavily in product, then focus on investing in sales and marketing.  Here we haven’t exactly gotten it backwards, but we’re not far off.  Two years ago, one of our major company-wide initiatives/priorities was “Product First.”  This year, we decided that the top priority would be “Product Still First.”  The larger we’ve gotten, the more emphasis we’ve placed on product development in terms of resource allocation and visibility.  That doesn’t mean we’re not investing in marketing or the growth our sales team — we are — but our mentality has definitely shifted to make sure we continue to innovate our product set at a rapid clip while still making sure existing products and systems are not only stable but also improving incrementally quickly enough.

I don’t know if there’s a single generalizable root cause as to why we’ve built the company backwards, or if that’s even a fair statement overall.  It might be a sign that my leadership team is maturing, or more likely that we didn’t know what we were doing 11-12 years ago when we got started — but it’s an interesting observation.  I’m not even sure whether to say it’s been good or bad for us, though we’re certainly happy with where we are as a company and what our prospects look like for the foreseeable future.

But it does lead me to wonder what else we should have done years ago that we’re about to get around to!

Ratcheting Up Is Hard To Do (or Boiling the Frog, Part II)

I’ve had to ratchet down business several times over the years at Return Path.  Times were tough, revenues weren’t coming as fast as promised, my investors and I were growing weary, the dot com crash, etc. etc.  We had layoffs, consolidated jobs, cut salaries multiple times, made people wear 8 hats to get the job done.  It’s an awful process to go through.

In the last year or so, business has finally started going much better.  We’ve been fortunate in many ways that we’re still around, with products that work really well, with a good customer base, and with good and patient investors and employees, as the business climate has improved.  We’ve grown from 22 people (at our low point) up to almost 75.  But what that has meant for our organization is that we’ve had to quickly "ratchet back up," adding people, adding new functions that were previously one of many hats worn by a single person, operating at a different level.  While ratcheting down is a nightmare, it turns out that quickly ratcheting back up is in many ways just as hard on the organization.

Some examples:

– IT (internal email and servers) has been run by a part-time resource and "off the side of the desk" of our product development engineering department.  Now it is almost completely broken, and it turned out we hired a very talented IT manager, probably about three months too late.

– Staffing up is particularly tough without a dedicated HR function and with a legacy of missed budgets.  HR has been done off the side of the desk of me and my executive assistant, and we can’t keep pace any more with all the recruiting, hiring, training, and development planning.  Now that we feel like we need and can afford more staff, we need to hire an HR manager to handle it all, but we need someone in place and trained today, not three months from now.

– A 22 person company can function brilliantly as a network of Individual Contributors who loosely coordinate with each other.  But now what we need at 75 is a a few hardcore Managers that can build systems and processes so that the whole machine runs smoothly.  We don’t necessarily have those people in-house, and if we bring them in from the outside, I’m left wondering if the Individual Contributors will feel like their years of hard work aren’t appreciated if there’s a new layer of management surrounding them.

I hope we never have to ratchet down again…but part of the reason why now is that I never want to have to ratchet back up, either!

Thanks to my COO and business partner Jack Sinclair for his help with this posting.