As part of the new section on Exits in the Second Edition of the book (order here), there’s a specific chapter around handling the post-sale transition and integration process.  

No two transitions are exactly the same.  If the buyer is a financial sponsor, you may have the same job the day after the deal closes that you had the day before, just with a new owner and new rules for you.  Sometimes you’ll stay on with a strategic buyer as the head of a division, or the head of your product.  Sometimes you leave on Day 1.  Sometimes you leave later.  

But the most important thing you can do is remember that once the deal is over, it’s over.  That’s why an honest answer to the question, “Are you ready to let go?” that I posed in an early post is so important. You may or may not be the CEO, but now you definitely have a new boss, and in many cases, a boss for the first time in years. And you are no longer in charge.

“Even though the deal was called a merger,” I once heard Ted Leonsis tell the Moviefone founders a while after AOL acquired Moviefone, “please remember that you have been acquired.” Your job is to figure out how best to set your team and products up for success in the new environment, regardless of how long or short you plan to stay at the new company. 

We tried to focus our transition at Return Path to Validity in a few ways:

• For employees, we spent most of our energy and our capital setting things up in the deal documents before closing, recognizing we’d have no control of things after the deal was signed.  Things like how much severance people would get if they were let go, and for how long post-deal, how much their comp could change, whether they could be required to move – those are all things you can negotiate into a deal
• For ourselves as leaders and me as CEO, knowing most of us would leave almost immediately post-deal, I wanted to have as elegant an exit as possible after 20 years.  Fortunately, I had a good partner in this dialog in Mark Briggs, the acquiring CEO.  Mark and I worked out rules of engagement and expenses associated with “the baton pass,” as we called it, that let our execs have the opportunity to say a proper goodbye and thank you to our teams, with a series of in-person events and a final RP gift pack.  This was a really important way we all got closure on this chapter in our lives
• For the new owners of the business, our objective was to be of service to them, knowing they’d want to run it differently.  So, for example, every time our new owners from Validity asked me a question (“Should we do X or Y,” or “Should we keep person A or person B?”), my answer was never simple. It was always, “What’s your strategy with regard to Z?” and then my advice could be in context, as opposed to thinking about what I would do in the prior context.

There are more details on this in the new section on exits in Startup CEO:  A Field Guide to Scaling Up Your Business.

One of the new sections in the Second Edition (order here) that I’m excited to share is a deep dive with several chapters on selling your company.  The next few blog posts will share some of my thinking on the subjects as they’re arranged into chapters in the book.  For many startup CEOs the culmination of their life’s work is an exit of some kind (other than being fired!). Personally, there were a range of emotions surging through me when we got to the point of a sale and while the financial reward can be enticing, there are a lot of things that you start to think about, like all the things you created, all the offsites with your team, the good and bad times and, especially, the deep relationships you’ve developed over the years.

If you’re a founder entrepreneur who has led your company for several years, the odds are you have a significant amount of emotional investment in your company, too.  For many entrepreneurs, the company is a deeply embedded part of their identities as a human – right or wrong, for better or for worse. 

I said in the First Edition that entrepreneurship is full of extreme highs and lows and the most difficult thing to accept is when they happen at the same time. Nothing describes the process of selling your company more accurately than that saying because you’re gaining some financial reward, but you’re losing your life’s work. You’re also creating some chaos and uncertainty for all your employees.

One of the most important questions you can ask yourself is, “Am I ready to let go?” For me I used a simple litmus test to help answer that question and I used the answers to these four questions to figure out the sell-don’t sell dilemma:

• Am I having fun at work?
• Am I learning and growing as a professional?
• Is my work financially rewarding enough, either in the short-term or in the long-term?
• Am I having the impact I want to have on the world?

You can turn these questions into a scale if you want to be more sophisticated but there are two important points: one, you have to do it and two, you have to look at all four questions as really just providing one piece of information. If I walked into an executive team meeting and said, “I’m not having fun at work,” my team would probably look at me and say (or think to themselves), “Hey, buddy, suck it up.” They’d be right, but if you have low scores on all four questions, that tells a different story. 

So how do you know when it’s time to sell? Usually there’s an inflection point of some kind–either positive or negative. On the positive side, you can receive an out-of-the-blue inbound offer, something you never expected and believe me, that will get the juices flowing! Or maybe when you look two years out you realize that your company is at its highwater mark in valuation, so it becomes a timing issue. Sometimes you can have a major internal problem related to the cap table–a founder with a lot of stock needs liquidity or you need to push this person out of the company. Institutional investors can require liquidity too, and while it’s possible to buy out shareholders or create a debt / equity financing, you might think about selling the company instead.

Other points on selling your company that I make in the Second Edition revolve around who you sell to (financial buyer, strategic buyer) and what the likely outcome of those types of sales are for you and your employees. You’ll need to brace yourself, your team, and your company, and your family for a major impact–the sales process is disruptive, non-linear, and intense and it’s not done until the final agreement is signed. 

Above all else, There is no right or wrong answer here about selling your company.  But there probably is a right or wrong answer for YOU.  That’s the most important thing to think through, deeply, at the early stages of working on selling your company.

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.

I wrote part I of this post in 2011, and I feel even more strongly about it today. I generally keep this blog away from politics (don’t we have enough of that running around?), but periodically, I find some common sense, centrist piece of information worth sharing. In this case, I just read a great and very short book, Six Amendments: How and Why We Should Change the Constitution, by former Supreme Court Justice John Paul Stevens, that, if you care about the polarization and fractiousness going on in our country now, you’d appreciate.

If nothing else, the shattered norms and customs of the last several years should point people to the fact that our Constitution needs some revision. Not a massive structural overhaul, but some changes on the margin to keep it fresh, as we approach its 250th anniversary in the next couple decades.

Blogiversary, Part VII

Today marks the seventh anniversary of OnlyOnce.  I haven’t marked the date with a post in three years, but here was my last such post (with links to prior posts in it).  In sum up until now, my reasons for blogging have been written up as:

• “Thinking” (writing short posts helps me crystallize my thinking)
• “Employees” (one of our senior people once called reading OnlyOnce “getting a peek inside Matt’s head)
• My book reviews help me crystallize my takeaways from books and serve as a bit of a personal reference library
• I like writing and don’t get to do it often

After seven years, though, I’m going to add another important point of value for me for writing OnlyOnce:  now, at 672 posts (including 27 that are scheduled but not yet posted – easy a record for me), this blog now serves as a repository for me of my own lessons learned, best practices, anecdotes, and aphorisms.  Thanks to Lijit, it’s easy for me and others to search.  Thanks to the new WordPress format and design by my friends at Slice of Lime, the categories and tagging make it much easier to navigate.

I probably get one question a week from a fellow CEO or prospective entrepreneur or employee that, instead of typing out an answer or setting up a meeting, I can actually just send a link as a starting point.  Sometimes there are follow-up questions, sometimes there aren’t.  But the blog is proving to be a very efficient form of documentation.

Building the Company vs. Building the Business

I was being interviewed recently for a book someone is writing on entrepreneurship, which focused on identifying the elements of my “playbook” for entrepreneurial success at Return Path.  I’m not sure I’ve ever had a full playbook, though I’ve certainly documented pieces of it in this blog over the years.  One of the conversations we had in the interview was around the topic of building the company vs. building the business.

The classic entrepreneur builds the business — quite frankly, he or she probably just builds the product for a long time first, then the business.  In the course of the interview, I realized that I’ve spent at least as much energy over the years building the company concurrently with the product/business.  In fact, in many ways, I probably spent more time building the company in the early years than the business warranted given its size and stage.  This is probably related to my theme from a few months ago about building Return Path “Backwards.”

What do I mean by building the company as opposed to building the business?

• Building the business means obsessing over things like product features, getting traction with early clients, competition, and generating buzz
• Building the company means obsessing over things like HR policies, company values and culture, long-term strategy, and investor reporting

In the early years, I did some things that now seem crazy for a brand new, 25-person company, like designing a sabbatical policy that wouldn’t kick in until an employee’s 7th anniversary.  But I don’t regret doing them, and I don’t think they were wasted effort in the long run, even if they were a little wasted in the short run.  I think working on company-building early on paid benefits in two ways for us:

1. They helped lay the groundwork for scaling – what we’re finding now as we are trying to rapidly scale up the business, and even over the last few years since we’ve been scaling at a moderate pace, is that we are doing so on a very solid foundation
2. The company didn’t die when the product and business died – because we had built a good company, when our original ECOA business basically proved to be a loser back in 2002, it was a fairly obvious decision (on the part of both the management team and the venture syndicate) to keep the business going but pivot the business, more than once

Starting about four years ago, for the first time, I felt like we had a great business to match our great company.  Now that those two things are in sync, we are zooming forward at an amazing pace, and we’re doing it perhaps more gracefully than we would be doing it if we hadn’t focused on building the company along the way.

I’m not saying that there’s a right path or a wrong path here when you compare business building with company building, although as I wrote this post, my #2 conclusion above is a particularly poignant one, that without a strong company, we wouldn’t be here 12 years later.  Of course, you could always argue that if I’d spent more time building the business and less time building the company, we might have succeeded sooner.  In the end, a good CEO and management team must be concerned about getting both elements right if they want to build an enduring stand-alone company.

I’ve always thought my grandmother was a remarkable person. At age 92 (sorry to publish it, Gma), she is pretty hip — drives a Lexus, plays a mean game of bridge, carries a cell phone, and until recently, used WebTV.

She was getting tired of the slow connection via dial-up, so Mariquita and I gave her an old laptop we had and installed a cable modem (I have to commend Cablevision of Westchester/Optimum Online on a very smooth and easy installation process), so now she’s the world’s newest computer user. Those of us who work with computers every day take some of the basics for granted, but if you’ve never used Windows or a mouse before, this stuff is not easy to learn.

But I’m proud to say that Grandma Hazel, after three short days, is using Outlook, used Return Path to announce her change of email address to her address book, set up 1-click on Amazon and bought a couple books, read my blog, and even subscribed to receive email alerts when I post.

After 5 years of WebTV, I think she’s in for a real treat with how fast the web can be and how much there is to explore out there. And if anyone can figure out how to use this stuff, it’s her. Welcome to the web and to blogs, Gma!

Today marks Return Path’s 16^th anniversary.  I am incredibly proud of so many things we have accomplished here and am brimming with optimism about the road ahead. While we are still a bit of an awkward teenager as a company continuing to scale, 16 is much less of an awkward teen year than 13, both metaphorically and actually. Hey – we are going to head off for college in two short years!

In honor of 16 Candles, one of my favorite movies that came out when I was a teenager, I thought I’d mark this occasion by drawing the more obvious comparisons between us and some of the main characters from the movie.  My apologies to those who may have missed this movie along the way.

Why we are like Samantha (Molly Ringwald):  No, no one borrowed our underpants. But we can’t believe that people forgot our birthday either.

Why we are like Farmer Ted / The Geek (Anthony Michael Hall):  Meet my co-founder, George Bilbrey. I mean that with love.

Why we are like Jake (Michael Schoeffling):  Meet my other co-founder, Jack Sinclair. The shy, good looking one.

Why we are like Long Duk Dong (Gedde Watanabe):  We have only been in our newest business, Consumer Insight, for five minutes, but we already have a whole bunch of dates.

Why we are like Grandpa Fred (Max Showalter):  We’ve been around long enough to know the ways of the world, not to mention all the good wisecracks in the book.

There you have it. Year 17, here we come!

Secrets to Yawn-Free Board Meetings

[This post first appeared as an article in Entrepreneur Magazine as part of a new series I’m publishing there in conjunction with my book, Startup CEO:  A Field Guide to Scaling Up Your Business]

The objective of board meetings should always be to have great conversations that help you and your executive team think clearly about the issues in front of you, as well as making sure your directors have a clear and transparent view of the state of the business. These conversations come from a team dynamic that encourages productive conflict. There’s no sure-fire formula for achieving this level of engagement, but here are three few guidelines you can follow to increase your chances.

Schedule board meetings in advance, and forge a schedule that works. Nothing is more disruptive – or more likely to drive low turnout – than last minute scheduling. Make sure you, or your executive assistant, knows board members’ general schedules and travel requirements, and whether they manage their own calendar or have their own executive assistant. Set your board meeting schedule for the year in the early fall, which is typically when people are mapping out most of their year’s major activities. If you know that one of your board members has to travel for your meetings, work with the CEOs of the other companies to coordinate meeting dates. Vary the location of meetings if you have directors in multiple geographies so travel is a shared sacrifice.

In the startup stage of our business at Return Path, we ran monthly meetings for an hour, mostly call-in. In the revenue stage, we moved to six to eight meetings per year, two hours in length, perhaps supplemented with two longer-form and in-person meetings. As a growth stage company, we run quarterly meetings. They’re all in-person, meaning every director is expected to travel to every meeting. We probably lose one director each time to a call-in or a no-show for some unavoidable conflict, but, for the most part, everyone is present. We leave four hours for every meeting (it’s almost impossible to get everything done in less time than that) and sometimes we need longer.

Many years, we also hold a board offsite, which is a meeting that runs across 24 hours, usually an afternoon, a dinner, and a morning, and is geared to recapping the prior year and planning out the next year together. It’s especially exhausting to do these meetings, and I’m sure it’s especially exhausting to attend them, but they’re well worth it. The intensity of the sessions, discussion, and even social time in between meetings is great for everyone to get on the same page and remember what’s working, what’s not, and what the world around us looks like as we dive into the deep end for another year.

Build a forward-looking agenda. The second step in having great board meetings is to set an agenda that will prompt the discussion that you want to have. With our current four-hour meetings, our time allocation is the following:

I. Welcomes and framing (5 minutes)

II. Official Business (no more than 15 minutes unless something big is going on)

III. Retrospective (45 minutes)

a. Target a short discussion on highlighted issues

b. Leave some time for Q&A

IV. On My Mind (2 hours)

a. You can spend this entire time on one topic, more than one, or all, as needed.

b. Format for discussions can vary—this is a good opportunity for breakout sessions, for example.

V. Executive Session (30 minutes)

This is your time with directors only, no observers or members of the management team (even if they are board members).

VI. Closed Session (30 minutes)

This is director-only time, without you or anyone else from the management team.

This agenda format focuses your meeting on the future, not the past. In the early years of the business, our board meetings were probably 75 percent “looking backwards” and 25 percent “looking forwards.” They were reporting meetings—reports which were largely in the hands of board members before the meetings anyway. They were dull as anything, and they were redundant: all of our board members were capable of processing historical information on their own. Today, our meetings are probably ten percent “looking backwards” and 90 percent “looking forwards”—and much more interesting as a result.

Separate background reading and presentation materials. Finally, focus on creating a more engaging dialogue during the meeting by separating background reading from presentation materials. In our early days, we created a huge Powerpoint deck as both a handout the week before the meeting and as the in-meeting deck. That didn’t create an engaging meeting.

There’s nothing more mind-numbing than a board meeting where the advance reading materials are lengthy Powerpoint presentations, than when the meeting itself is a series of team members standing up and going through the same slides, bullet by excruciating bullet—that attendees could read on their own.

When we separated the background and presentation materials, people were engaged by the Powerpoint—because it delivered fresh content. We started making the decks fun and engaging and colorful, as opposed to simple text and bullet slides. That was a step in the right direction, but the preparation consumed twice as much time for the management team, and we certainly didn’t get twice the value from it.

Now we send out a great set of comprehensive reading materials and reports ahead of the meeting, and then we have a completely Powerpoint-free meeting. No slides on the wall. This changes the paradigm away from a presentation—the whole concept of “management presenting to the board”—to an actual discussion. No checking email. No yawns. Nobody nodding off. Everyone—management and board—is highly engaged

Best CEO/Entrepreneur Quote Ever, By a Mile

I’ve seen and heard a lot of these.  But perhaps it’s fitting that on Independence Day, I realized that this gem of a quote, not specifically about entrepreneurs or CEOs but very applicable to them, comes from President Theodore Roosevelt in his “Citizenship in a Republic” speech at the Sorbonne in Paris, April 23, 1910:

It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.

Amen, Brother Teddy.  This quote is so good that it appears twice independently (once from me, once in a contributor’s sidebar) in my almost-ready-to-pre-order book, Startup CEO.  In fact, let me quietly take this opportunity to start a bit of a hashtag movement around the topic at #startupceo.  More to come on this next week!

I’m thrilled to announce that we created mini-books (about 80 pages long and only $9-10 on Amazon) out of five of the major functional areas covered in Startup CXO: A Field Guide to Scaling Up Your Company’s Critical Functions and Teams, part of our series along with Startup CEO: A Field Guide to Scaling Up Your Business and Startup Boards: A Field Guide to Building and Leading an Effective Board of Directors.

I’ve always said that while I love all three books, in some ways Startup CXO is the best because it’s a “book of books.” While I’d still encourage all CEOs and senior executives (CXOs) to read the full manuscript, my friends and co-authors and I are happy to present these five books, now available on Amazon, for functional specialists:

• Startup CFO: A Field Guide to Scaling Up Your Company’s Finance Function
• Startup CRO: A Field Guide to Scaling Up Your Company’s Sales Function
• Startup CMO: A Field Guide to Scaling up Your Company’s Marketing Function
• Startup CPO: A Field Guide to Scaling Up Your Company’s HR/People Function
• Startup CTO: A Field Guide to Scaling Up Your Company’s Technology/Product Function

Each book has several topics in common – chapters on the nature of an executive’s role, how a fractional person works in that role, how the role works with the leadership team, how to hire that role, how the role works in the beginning of a startup’s life, how the role scales over time, and CEO:CEO advice about managing the role.

In Startup CFO, the role-specific topics Jack Sinclair talks about are Laying the CFO Foundation, Fundraising, Size of Opportunity, Financial Plan, Unit Economics and KPIs, Investor Ecosystem Research, Pricing and Valuation, Due Diligence and Corporate Documentation, Using External Counsel, Operational Accounting, Treasury and Cash Management, Building an In-House Accounting Team, International Operations, Strategic Finance, High Impact Areas for the Startup CFO as Partner, Board and Shareholder Management, Equity, and M&A.

In Startup CRO, the role-specific topics Anita Absey talks about are Hiring the Right People, Profile of Successful Sales People, Compensation, Pipeline, Scaling the Sales Organization, Sales Culture, Sales Process and Methodology, Sales Operating System, Marketing Alignment, Market Assessment & Alignment, Channels, Geographic Expansion, and Packaging & Pricing.

In Startup CMO, the role-specific topics Nick Badgett and Holly Enneking talk about are Generating Demand for Sales, Supporting the Company’s Culture, Breaking Down Marketing’s Functions, Events, Content & Communication, Product Marketing, Marketing Operations, Sales Development, and Building a Marketing Machine.

In Startup CPO (HR/People), the role-specific topics Cathy Hawley talks about are Values and Culture, Diversity Equity and Inclusion, Building Your Team, Organizational Design and Operating Systems, Team Development, Leadership Development, Talent and Performance Management, Career Pathing, Role Specific Learning and Development, Employee Engagement, Rewards and Recognition, Reductions in Force, Recruiting, Onboarding, Compensation, People Operations, and Systems.

In Startup CTO (Technology and Product), the role-specific topics Shawn Nussbaum talks about are The Product Development Leaders, Product Development Culture, Technical Strategy, Proportional Engineering Investment and Managing Technical Debt, Shifting to a New Development Culture, Starting Things, Hiring Product Development Team Members, Increasing the Funnel and Building Diverse Teams, Retaining and Career Pathing People, Hiring and Growing Leaders, Organizing Collaborating with and Motivating Effective Teams, Due Diligence and Lessons Learned from a Sale Process, Selling Your Company, Preparation, and Selling Your Company/Telling the Story.

Each of these executives is a true subject matter expert, not to mention a great friend and someone who is a lot of fun to hang out with on an executive team. I’m proud of these books and hope they’re a useful addition to the startup canon.