Help Me, Help You, Part II

Thanks to the nearly 100 readers who responded to my reader survey this past week.  While I’m not sure it’s a truly statistically significant base of OnlyOnce’s audience (I’ll have to ask my friends over at Authentic Response), I’ll treat it like it is.  Here’s what I learned.  First, the general results:

• Satisfaction levels are good – 46% are regular readers and love it, 48% read occasionally and think it’s ok, and only 6% gave it an “eh – wouldn’t miss it if it went away”
• Entrepreneurship is the most popular topic, with 86% interest, and Leadership/Management is a close second at 82%.  Online/Email Marketing came in at 61% and Book Reviews at 43%.  Current Affairs and Travel (which I almost never use) were 31% and 25%, respectively
• 72% of people feel frequency at 1-2 posts a week is on target.  Only 4.5% want fewer posts, and 24% (those kind souls) want it more often
• Most people other than Return Path staff found the site through a link on another blog rather than search

Next, the open-ended comments were interesting.  A summary snapshot:

• Positive comments were generally about tone and candid approach, succinct posts, and topics.  One nice person noted his/her favorite thing was “the author” (thank you Mom/Dad/Grandma/Mariquita/Michael)
• Constructive comments varied.  Some good ones are noted below:
• “assumes a level of knowledge not everyone has”
• “too heralding of the VC view of the world”
• “too much focus on email/marketing,” “too local/American” (that’s who I am, though)
• “ I would like to see more about what it takes to be a CEO in day to day operations. what skills do you find you need, what obstacles do you come across, issues with driving a company.”
• “A little too much PRish in regards to Return Path”
• “It seems like everything you write about is too positive. Or at least a negative story with a happy ending. Nothing about what sucks to run a company. I run one and a lot of it does suck.”
• “Not enough personal stuff — who is the author?” (see the About Me link on the blog)
  
• “The word vigilante is bandied around way too much by the author”
• And of course someone noted as constructive feedback that I haven’t yet mentioned my mother’s name (sorry, Mom/Joyce!).  And one person suggested I shave.  Thanks, really.

Finally, the demographics of my audience:

• 3 % are under 24, 45% are 25-34, 41% are 35-49, 11% are over 49
• 80% male and 20% female (surprising)
• Company data wasn’t so interesting, or I phrased the question poorly – but one takeaway is that about 1/2 of readers seem to be “in the industry” generally speaking, with lots of Return Path staff subscribing as well as lots of other entrepreneurs and a handful of VCs
• Level/title was more interesting – nearly half the audience is SVP-level or above at their company

Thanks again, everyone, and I’ll take note of this feedback for future postings!

Counter Cliche:  How Much Paranoia is Too Much Paranoia?, Part II

After the original posting, one of my readers wrote in with the following question:

I was one of the first employees at a pre-funding enterprise social networking company, after having consulted on doing their business plan for them (not coming up with it; mainly turning the CEO and CTO’s engineer-speak into English). 

So with all that background, when you say “open book” to your employees, can you break that out some more?  I have an idea of what I think that means, and what it doesn’t, but I’d love to hear your thoughts on it too.

My thoughts on this are quite simple.  We are willing to share everything internally other than compensation.  We publish detailed monthly financials and reporting to the team, and we ask that they treat the information as extremely confidential.  We have had only good things come from this level of openness with our team.  Good ideas, good esprit de corps, and a radical reduction in fear of the unknown (the old "Looks like we had a bad quarter, does that mean I need to look for a job now?  Are we running out of money?"). 

In fact, I know one other CEO who goes so far as to publish an only-slightly modified version of his Board books to the entire company.

Transparency is a good thing.

How Do You Eat an Elephant?

Credit to my colleague Chuck Drake for this one…but How Do You Eat an Elephant?  One Bite at a Time.  The David Allen school of time management (post, book)  talks about breaking your projects down into “Next Actions” so they don’t become overwhelming and can easily move forward one step at a time.

I think the same is true of organizational projects – perhaps even more so.  Any time we find ourselves swirling around a big initiative at Return Path, we are at our best when we ask ourselves some questions along these lines:

• How can we be scrappier about this?
• It it ok to be messy here…or at least not perfect?
• What is the next milestone?
• What else needs to be done until we learn the likely outcome?

We had a great example of this recently around rolling out a new product to our sales and service team.  The team is now pretty large – over 100 globally.  It was a daunting task to try to get all those people trained up at once.  The answer?  We took a bite out of the elephant.  We picked a couple of sales reps and a couple of account managers and started by training them on the new product.  Now we can figure out how to institutionalize learnings from the limited roll-out and figure out the next step from there.  Much easier than what otherwise would have been a pretty high-stakes project without enough learnings behind it, even though it will take a little longer and be a little messier.

Deliverability Resources

After my last posting on email deliverability, a few people emailed me to ask about different resources that Return Path has published over the last six months or so on the subject. 

Clicking this link will take you to the white paper download form on our web site, which has all the white papers we’ve written in the past 12 months or so listed, and the most recent one on deliverability pre-checked to get you started.  You can check as many of the boxes you want in one shot, and although the download will trigger an email and/or call from someone in our sales department, you can simply respond to the email and tell them thanks but no thanks if you’re not interested in learning more about our services (of course, you’re also welcome to take the call if you’re interested). 

Anyway, deliverability topics we’ve covered of late which are on this list inclue:

Email Blocking and Filtering Report

Beyond Authentication: Keys to Email Delivery Success

Bonded Sender Increases Email Deliverability by more than 20%

Email Accreditation Programs: What Is All the Buzz About?

Back to the Basics: Deliverability 101 – Getting your email into the inbox

Email Indigestion: How to Avoid Deliverability Failures by Optimizing Your Permission Practices

Email Deliverability Rates Impacted by Time Campaigns Sent

The Secret Role of the Email Address Book…and what it means for your email delivery

How Data Partners Impact Your Email Performance: The checklist for all email aquisition marketers to live by.

Avoiding the Spam Filter Trap

Enjoy!

The Rumors of Email’s Demise Have Been Greatly Exaggerated, Part IV

This one could also be entitled “What Are The Bloggers Smoking?”

Reports from last week’s Blog Business Summit like this one are starting to filter in (pun slightly intended).  This one gets a big yawn from me, even more so than the other times I’ve posted on this subject, here, here, and here.  I’m as much of a blogger and a believer in blogs and RSS as the next guy — maybe even more so — but honestly, people, blogs are going to replace email?

I’d like to address a few critical points here head on, although a large part of me doesn’t even want to dignify yet another empty “email is dead” quote with a response.

Basic error #1. The article seems to confuse blogs with RSS feeds.  RSS feeds are data streams coming into an RSS reader application.  Blogs are web sites.  Hello?!?

Fallacy #1. Because blogs/RSS are interesting new media, email will go away.  To paraphrase my colleague Mike Mayor, why is it that whenever something new comes along, its proponents have to bash the current paradigm to make their thing seem more important?  Let’s go through this one — TV came along, and people said radio would go away.  Cable came along, and everyone said the networks were toast.  The fax machine came along, and FedEx was said to be relegated to legal documents that needed to be signed personally.  The Internet came along, and people said everything else was insignificant (newspapers, TV, radio, snail mail).  So yes, new media do arrive on the scene and perhaps make a dent in all prior media, but I’m having a hard time thinking of that one comes in and clocks another one mano a mano.

Fallacy #2. Spam has made email more difficult, therefore email will go away.  There’s a whole industry out there fighting spam.  I know, I know, just because we want the problem to go away doesn’t mean that we can will it away — but filters are working better by the day (did everyone catch this posting about Postini this week?), false positives can be managed down by vigilant clients working with vendors like Return Path, and whitelists, whenever they start really working and charging money to clients to guarantee delivery, will still leave email as the cheapest medium for targeted commercial messaging out there.

Naive belief #1. Spam has harmed email, but blogs/RSS are immune to the same problems.  I’m sorry, do you think the bad guys, or as Fred always calls it, the Internet Axis of Evil (spam, viruses, spyware, DNS hacking, phishing, and the like) are going to leave blogs and RSS feeds alone?  Not a chance.  The bad guys are already hard at work expanding their Axis of Evil.  There’s already comment spam for blogs (or blam, as some call it).  People have and can hijack RSS feeds (no cool name yet).  There’s Instant Messenger spam (spim).  Last week, I heard about a new one that blew me away, which is that someone figured out how to hijack a Voice Over IP phone call and insert an audio ad/porn into the call (spip).

Naive belief #2. Blogs are truly interactive.  Other than a couple of very popular blogs during the height of last fall’s election, I just don’t think this is true for the mainstream.  There are certainly some people who have a little too much time on their hands who spend hours every day blogging, but most people skim most blogs as one-way communication.   While there are mechanisms for commenting, there aren’t ready mechanisms for publishing comments back to the blog audience (thank goodness), so this medium hasn’t turned out nearly as interactive as people had hoped at the onset.  RSS feeds, in case the writer/speaker was confused in this argument, are completely non-interactive.

Naive belief #3. People will read blogs with an agenda of marketing specific products and services.  The beauty of the blog is that it’s not corporate, and it doesn’t have marketing spin on it.  Blogs are much more journals and publishing tools than marketing vehicles.  Who the heck is going to read a blog on Coke?  Or Nike?  Or Microsoft?  Sure, I might read Howard Shultz’s blog if he had one (his book was good enough), but that’s very different than reading the Starbucks official blog.  Why bother?  Where’s the value there?

Ok, I’m done with today’s rant.  As I said, I love blogging as much as the next guy, but puh-lease!  And for the record, I do believe that RSS feeds and maybe even IM from marketers/publishers will supplement email and in some cases maybe even replace it, but email just isn’t going away any time soon.

Sometimes, There Is No Lesson To Be Learned

We had a very unusual employee situation this week at Return Path.  A brand new senior executive we brought in to the company to be our first ever head of HR and Organization Development resigned very abruptly after only a few weeks on the job, citing a complete change of heart about her career direction and moving on to a government position in economic and community development.  Unfortunately, the person gave no notice and provided no assistance with transition, and resigned by cell phone.  What a disappointment, especially coming from an HR professional!

After getting over my disbelief/irritation/rage (not easy, not a small amount), after communicating this difficult message to the company, and after sending a thoughtful-yet-cathartic note to the person, I sat down to think a little bit about how I could have prevented or at least spotted the situation in advance.

We interviewed the person thoroughly — 10 people internally conducted interviews, and I interviewed the person for almost four hours myself, conducting one of the most rigorous interviews I’ve ever conducted given how critical this position was to our organization at this time.  (The interview followed the Chronological In-Depth Structured interview format from Brad Smart’s book Topgrading — more on that in a future posting.)  I also checked five references on the person, all of which were sterling.  I had one outside person, an executive coach with whom I work, interview the person.  Everything checked out, and the person’s attitude and enthusiasm about the position couldn’t have been better.

My conclusion on the lesson learned here?  It’s “Sometimes, there is no lesson to be learned.”  There may be ancillary lessons around handling the situation once it became apparent, but I think the core lesson I’d hope to get out of this — that we could have done something different in the interview process or orientation or first few weeks to prevent or at least spot this ahead of time — appears to be nonexistent.  Hmmmph!

Why is Seth Godin so Grumpy?

Permission marketing guru Seth Godin says we should all Beware the CEO blog. His logic? Blogs should have six characteristics: Candor, Urgency, Timeliness, Pithiness, Controversy, and maybe Utility — and apparently in his book, CEOs don’t possess those characteristics.

Certainly, CEOs who view blogs as a promotional tool are wasting their time, or are at least missing a fundamental understanding about the power of blogs and interactivity.

But many of the ones I read (and the one I write) do their best to be anything but promotional. One of my colleagues here describes my blog as “a peek inside the CEO’s head,” which is a great way of putting it. And I still stand by my earlier posting about the value of the blog to me and to the company — hardly “annual report fluff.”

How’s that for honest, timely, controversial, and pithy, Seth?

Comment on Political versus Corporate Leadership, Part II: Admitting Mistakes

My colleague Mike Mayor writes:

So you’e only asking for politicians to be honest Matt? Is that all? 🙂

Couldn’t agree more on the CEO side. A CEO who cannot admit to failure is doomed to be surrounded by “yes men” and, therefore, must go it alone, whereas the CEO who admits to having the odd bad idea every now and then is more likely to get truthful and accuruate information from those around him/her. Which scenario would you prefer to base your next decision on?

However, I look more to Hollywood for fostering the faux CEO/Board Room stereotypes, not politics. Look no further than the highest ranked show among 18 to 46 year olds: The Apprentice. Trump is just one contemporary example of successfully perpetuating the “kill or be killed” mentality of the ideal CEO. In his book, “How to Get Rich” one of his lessons is to “never take the blame for anything” (meanwhile Trump gets rich by being a caricature of a CEO).

The ideal CEO needs to set the example for the behavior of his employees, and creates opportunities by building relationships not “squashing the competition.” And like it or not, the ideal Board Room is actually a Think Tank of great minds working toward a common goal rather than a place to play mind games and mental poker.

Unfortunately, both of these things make for a horrible TV show but do contribute to building truly great companies! On the other hand, watch too many TV shows (or follow the politician’s lead) and you’ll likely become a CEO whose success is comparable to the CEOs of Enron and Tyco.

Political versus Corporate Leadership, Part II: Admitting Mistakes

The press conference this past spring where President Bush embarrassingly refused to admit that he had ever made any big mistakes, other than to reiterate his gaffe at trading Sammy Sosa when he owned the Texas Rangers, brings up another issue in this series: is it good for leaders, both political and corporate, to admit mistakes?

On the corporate side, I think the ability to admit a mistake is a must. Again, I’ll refer back to Jim Collins’ books Good to Great and Built to Last, both of which talk about humility and the ability to admit mistakes as a critical component of emotional intelligence, the cornerstone of solid leadership. And in another great work on corporate leadership, The Fifth Discipline, writer Peter Senge talks about “learning systems” and the “learning organization” as far superior companies. My experience echoes this. Publicly admitting a mistake, along with a careful distillation of lessons learned, can go a long way inside a company to strengthening the bond between leader and team, regardless of the size of the company.

But in politics, the stakes are higher and weirder — and the organization is a nation, not a company. Publicly admitting a single mistake can be a leader’s downfall. It’s too easy these days for political opponents to seize on a mistake as a “flip flop” and turn a candidate’s own admission into a highly-charge negative ad.

There was a fantastic op-ed in The Wall Street Journal back on April 15 on this topic, which unfortunately doesn’t have an available link at the moment, entitled “Bush Enters a Political Quandary As He Faces Calls for an Apology.” I’ll try to both quote from and summarize the article here since it’s central to this topic:

“For a politician, is an apology a sign of weakness or strength? That is the debate now swirling around President Bush after a prime-time news conference in which he refused reporters’ invitations to acknowledge any specific mistakes in handling the issue of terrorism or offer an apology to Sept. 11 victims’ families. Mr. Bush deflected the invitation, saying, ‘Here’s what I feel about that: The person responsible for the attacks was Osama bin Laden.’ Mr. Bush’s quandary is a time-honored struggle for politicians. While some have found a public apology helps them out of a tough spot, others discovered it can fuel more criticism. So far, there isn’t a definitive answer.”

The article goes on to say that while Harry Truman’s “the buck stops here” mentality was de rigeur in the Beltway for a while (through Kennedy’s Bay of Pigs fiasco and Reagan’s poor handling of Beirut), nowadays, apologies are a dreaded last resort. The reason? The rise of partisanship and the use of ethics and congressional or special counsel investigations used to humiliate or defeat political opponents by raising the spectre of corruption. The examples? Gingrich’s struggles in 1996 over his book; Clinton’s ridiculous linguistics machinations (“it depends what the definition of ‘is’ is”) around the Lewinsky scandal; and Lott’s downfall over segregationist comments.

The piece wraps up by saying that “Mr. Bush was backed into the apology quandary by one of his administration’s toughest critics, former White House terrorism expert Richard Clarke…Since then, White House officials have been pressured to do likewise [apologize to victims’ families about the government’s failings on 9/11] — or explain why they won’t…[but] aides are convinced that admitting error would only embolden Mr. Bush’s critics in the Democratic Party and the news media.”

So the question is: would Bush be better off by saying “Sorry, folks, we thought there were WMD in Iraq, but it turns out we were wrong. And we miscalculated how difficult it would be to win the war, how many troops it would take, and how many lives would be lost. I still feel like it was right for us to go to war there for the following four reasons…”?

I’m not sure about that. He’d certainly be more intellectually honest, and a number of people in intellectual circles would feel better about him as a leader, but my guess is that he thinks it would cost him the election in today’s environment. My conclusion is that today’s system is discouraging politicians from admitting mistakes, and that it will take an exceptionally courageous leader (neither Bush nor Kerry as far as I can tell) to do so.

In the end, while humility appeals to many people in a leader, it’s not for everyone. Fortunately for us, CEOs don’t have to run for office and most CEOs don’t have to face some the same level of public, personally competitive, and media scrutiny that politicians do. Now that’s an interesting conclusion that I didn’t intend at the beginning of the post — being a good political leader and being a good politician are sometimes deeply at odds with each other.

Next up in the series: Not sure! Any ideas? Please comment on the blog site or by emailing me.

This is another in a series of postings that relate to Fred’s and Brad’s various postings about venture capital funding. (Please note I have added an 11th item in response to a comment by Jack Sinclair, Return Path’s VP of Finance and my partner in crime on all transactions for the past five years.)

I think the most important part of the venture financing process is negotiating the term sheet. Although they’re only 2-3 pages long, term sheets contain summaries of all the critical aspects of a financing, and once they’re signed, the remainder of the financing process is significantly more “automatic.” Based on the financings I’ve seen and worked on – both as a VC and as an entrepreneur – my Top 10 (now 11) biggest takeaways for entrepreneurs are as follows (not in any particular order):

1. Get a good lawyer. I mean a really good one. Not just one who you are comfortable with and who is productive and doesn’t charge you too much (as Brad says, your wife’s brother’s friend’s neighbor), but one who knows venture financings like the back of his or her hand. They’re out there, many of them have worked on both sides of these transactions – for VCs and for entrepreneurs, and they can save your ass. No matter how many deals you’ve worked on, your lawyer has worked on more of them. Return Path’s lawyer, David Albin from Finn Dixon & Herling, is great if you need one.

2. Focus on terms that matter, otherwise known as Pick your battles. A typical VC term sheet will have at least 20 terms spelled out in it. There are only a few that really matter in the end, although you should at least make sure your lawyer is comfortable that the others are reasonable and somewhat standard. Spend time on valuation, the type of security, the option pool, Board composition, and your own compensation and rights.

2a (new). Sacrifice valuation for a clean security. Everyone always thinks that price/valuation is the most important thing to maximize in a deal. However, the structure of the security can be much more important in the long run. Whether the VCs buy 33% of your company or 30% of your company is much less important than having a capital structure that’s easy for an outsider to understand and want to join (e.g., investment banker or later-stage VC).

3. Always have a BATNA (Best Alternative to a Negotiated Agreement – a fancy way of saying Plan B). This is probably the most important piece of advice I can offer, and it extends to any negotiation, not just term sheets. If you have two or three VCs who are interested in funding you, I can guarantee you will end up with better terms from the highest quality investor in the group if you play the negotiation well. If you have one term sheet, you have zero leverage in your negotiation. Yes, you will spend 2-3x the amount of time on the process, but it’s well worth it.

4. Be prepared to pay up for high quality investors. There is a world of difference between good VCs and bad VCs (both the individual partners and the firms) that will ultimately have a lot to do with how successful your company can become. The quality of your VC isn’t more important than the quality of your product or your team, but it’s right up there. But – and this is an important but – you should expect to “pay” for quality in the form of slightly weaker terms (whether valuation or type of security). This is where having a BATNA really comes in handy.

5. Ask for references. Don’t be shy – prospective VCs are checking up on you…you have every right to do the same with them. Ask them for references of CEOs they’ve worked with. Ask them for a CEO they’ve had to fire as a reference. The good ones will give you the full roster of everyone they’ve ever funded and tell you to call anyone. The bad ones will give you two names and ask for time to prep them ahead of time.

6. Don’t let the VC get away with negotiating a point by saying “we always do it this way.” That’s just not true. VCs may have a preferred way of doing deals or handling a specific term, but every deal they’ve ever done is different, and they know it. If there’s a compelling reason for them to insist on a particular term, you have the right to hear it (if it’s important to you).

7. If you have multiple investors in the syndicate, insist on a single investor counsel and a lead investor. This is essential to (a) protect your sanity, and (b) prevent you from paying zillions of dollars in legal fees. You have to make the VCs stick to it, though – they can’t come back and re-trade the deal after it’s been negotiated. This is also helpful in getting a syndicate cooperating with each other and aligning the members’ interests, particularly if it has investors who have participated in different rounds of the company’s financing. Do expect to play moderator constantly throughout the process, however, to ensure that it goes smoothly.

8. Try do deal in advance with follow-on financings. When an investor doesn’t participate in a follow-on financing, it creates a total nightmare for you. Other investors will want to punish their wayward colleague and can create massive collateral damage in the process to common shareholders and management. Just as VCs will insist on something called “pre-emptive rights” (the right to invest in future financings if they want), you and your lawyer should insist on some protection in the event that one of your investors abandons you when you are raising more capital.

9. Handle the term sheet negotiation carefully. Whether it’s an initial round or a follow-on round, how you handle yourself in this negotiation sets the tone for the next stage of your relationship with the VC. The financing is the line of demarcation between you and the VC courting each other, and the VC joining your board and effectively becoming your boss.

10. Finally don’t forget to say thank you at the end of the process. Whether you send a formal email, a handwritten note, or a token gift, be sure to thank your VCs after a financing. They’re putting their butt on the line for your company, they’re investing in YOU, and they’re making it possible for you to pursue your dream. That deserves a thoughtful thanks in my book.

Sorry for the long posting. The next one or ones in this series will be on valuation, preferences, and “Venture Capital deal algebra.”

And here I am. In the middle of that “once.” Fred Wilson wrote a great posting by that title on his blog, and it has stuck with me. When I decided to start a blog, it was the first thing that came to mind as a main theme for the blog, so there you go. Only Once it is.

I’m not entirely sure why I’m doing a blog. Part of it is fascination with the newest corner of the Internet and its related areas like RSS (clicking on that link will get you the RSS feed of this blog). Part of it is to try out the medium and see how it might work for the hundreds of marketers and publishers who are my company’s clients. I suppose part of it is to generate some interest in my company, Return Path, which in my extremely biased opinion is one of the most interesting companies in the email services business.

My one hesitation about starting a blog is that the other part of me feels like blogs are a bit narcissistic, and I can’t imagine who on earth would want to read whatever it is that pops into my head. But I’ll give it a try and promise not to go overboard on the extraneous postings.

So, I will probably post periodically about experiences of an entrepreneur, of the one time I’ll ever be a first-time CEO. But I may also post on other things periodically that match my interests: book reviews, travelogs, Princeton, great wines, maybe even the occasional political commentary to prove to my predominantly New York friends that (a) not all Republicans are bad, and (b) not all Jewish New Yorkers are Democrats.

So, here we go…enjoy!