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.

Running a Productive Offsite

A couple OnlyOnce readers asked me to do a post on how I run senior team offsites.  It’s a great part of our management meeting routine at Return Path, and one that Patrick Lencioni talks about extensively in Death by Meeting (review, book) – a book worth reading if you care about this topic.

My senior team has four offsites per year.  I love them.  They are, along with my Board meetings, my favorite times of the year at work.  Here’s my formula for these meetings:

–          WHY:  There are a few purposes to our offsites.  One for us is that our senior team is geographically distributed across 4 geographies at the executive level and 6 or 7 at the broader management team level.  So for us, these are the only times of the year that we are actually in the same place.  But even if we were all in one place, we’d still do them.  The main purpose of the offsite is to pull up from the day-to-day and tackle strategic issues or things that just require more uninterrupted time.  The secondary purpose is to continue to build and develop the team, both personal relationships and team dynamics.  It’s critically important to build and sustain deep relationships across the Executive Team.  We need this time in order to be a coordinated, cohesive, high trust, aligned leadership team for the company.  As the company has expanded (particularly to diverse geographies), our senior team development has become increasingly critical

–          WHO:  Every offsite includes what we call our Executive Committee, which is for the most part, my direct reports, though that group also includes a couple C/SVP titled people who don’t report directly to me but who run significant parts of the company (7-8 people total).  Two of the four offsites we also invite the broader leadership team, which is for the most part all of the people reporting into the Executive Committee (another 20 people).  That part is new as we’ve gotten bigger.  In the earlier days, it was just my staff, and maybe one or two other people as needed for specific topics

–          WHERE:  Offsites aren’t always offsite for us.  We vary location to make geography work for people.  And we try to contain costs across all of them.  So every year, probably 2 of them are actually in one of our offices or at an inexpensive nearby hotel.  Then the other 2 are at somewhat nicer places, usually one at a conference-oriented hotel and then one at a more fun resort kind of place.  Even when we are in one of our offices, we really treat it like an offsite – no other meetings, etc., and we make sure we are out together at dinner every night

–          WHEN:  4x/year at roughly equal intervals.  We used to do them right before Board meetings as partial prep for those meetings, but that got too crowded.  Now we basically do them between Board meetings.  The only timing that’s critical is the end of year session which is all about budgeting and planning for the following year.  Our general formula when it’s the smaller group is two days and at least one, maybe two dinners.  When it’s the larger group, it’s three days and at least two dinners.  For longer meetings, we try to do at least a few hours of fun activity built into the schedule so it’s not all work.

–          WHAT:  Our offsites are super rigorous.  We put our heads together to wrestle with (sometimes solve) tough business problems – from how we’re running the company, to what’s happening with our culture, to strategic problems with our products, services and operations.  The agenda for these offsites varies widely, but the format is usually pretty consistent.  I usually open every offsite with some remarks and overall themes – a mini-state-of-the-union.  Then we do some kind of “check-in” exercise either about what people want to get out of the offsite, or something more fun like an envisioning exercise, something on a whiteboard or with post-its, etc.  We always try to spend half a day on team and individual development.  Each of us reads out our key development plan items from our most recent individual 360, does a self-assessment, then the rest of the team piles on with other data and opinions, so we keep each other honest and keep the feedback flowing.  Then we have a team development plan check-in that’s the same, but about how the team is interacting.  We always have one or two major topics to discuss coming in, and each of those has an owner and materials or a discussion paper sent out a few days ahead of time.  Then we usually have a laundry list of smaller items ranging from dumb/tactical to brain-teasing that we work in between topics or over meals (every meal has an agenda!).  There’s also time at breaks for sub-group meetings and ad hoc conversations.  We do try to come up for air, but the together time is so valuable that we squeeze every drop out of it.  Some of our best “meetings” over the years have happened side-by-side on elliptical trainers in the hotel gym at 6 a.m.  We usually have a closing check-out, next steps recap type of exercise as well.

–          HOW:  Lots of our time together is just the team, but we usually have our long-time executive coach Marc Maltz from Triad Consulting  facilitate the development plan section of the meeting.

I’m sure I missed some key things here.  Team, feel free to comment and add.  Others with other experiences, please do the same!

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.

Happy Leap Day!

One of the better books I’ve read in the last 6 months is James Clear’s Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones, which provides a great framework around habits. It’s worth a read, whether you’re talking about business habits/routines or personal ones. This isn’t a book review, but quickly while I have you – here’s a summary of his “laws”:

HOW TO CREATE A GOOD HABIT
The 1st Law: Make It Obvious
The 2nd Law:Make It Attractive
The 3rd Law: Make It Easy
The 4th Law: Make It Satisfying

HOW TO BREAK A BAD HABIT
Inversion of the 1st Law: Make It Invisible
Inversion of the 2nd Law: Make It Unattractive
Inversion of the 3rd Law: Make It Difficult
4th Law: Make It Unsatisfying

Add to that my other key takeaway, which is that you have to tie habits not just to outcomes but to identities, and…great book! Anyway, my story today is about decisions, and I’m going to quote James Clear’s email newsletter here, at the end of which he credits Tim Ferriss for sparking his thinking. So this is, what, third hand thinking. But it’s a great way to think about decisions, something I’ve written about a lot, including here.

I think about decisions in three ways: hats, haircuts, and tattoos.

Most decisions are like hats. Try one and if you don’t like it, put it back and try another. The cost of a mistake is low, so move quickly and try a bunch of hats.

Some decisions are like haircuts. You can fix a bad one, but it won’t be quick and you might feel foolish for awhile. That said, don’t be scared of a bad haircut. Trying something new is usually a risk worth taking. If it doesn’t work out, by this time next year you will have moved on and so will everyone else.

A few decisions are like tattoos. Once you make them, you have to live with them. Some mistakes are irreversible. Maybe you’ll move on for a moment, but then you’ll glance in the mirror and be reminded of that choice all over again. Even years later, the decision leaves a mark. When you’re dealing with an irreversible choice, move slowly and think carefully.

As someone who loves hats, has had (and seen) his fair share of bad haircuts, and has a tattoo, I can totally relate!

Counter Cliche:  Ready, Set, Exit

Fred’s VC Cliche of the week is the about the Quick Flip.  My counter to that is Ready, Set, Exit (image from Google Images).

Most quick flips involve a huge element of luck.  For every quick flip out there, there are dozens of companies that thought they’d be quick flips and ended up crashing and burning instead.  Back in 1999, when we started Return Path, another Internet entrepreneur I knew loved the idea so much that he told me to start writing the book then, because I would be able to sell the for $100 million before we even had a product in the market.  He said the title of the book would be Ready, Set, Exit.

We were careful not to behave that way, and that’s one of the reasons we’re still here and doing as well as  we are doing today.

As nice as it is to be an investor or an entrepreneur who falls into a Quick Flip scenario, beware of anyone who’s planning on Ready, Set, Exit, whether you’re being pitched to invest, to join the company, or even to be a customer.  Ready, Set, Exit scenarios can’t be manufactured or counted on (if they could, everyone would do them), and that whole mentality is completely antithetical to the stamina required to build a real company.

I think it’s analogous to what everyone tells you when you’re in junior high or high school:  you’ll never find a girlfriend/boyfriend if you’re out looking for one.

RSS Advertising

This is two-day-old news by now, but in case you missed it, we just announced than we – Return Path – are partnering with Feedburner to take RSS advertising to the next level (coverage here, here, and here).

As you probably know if you receive my feed or other ones, Feedburner has been doing some experimenting with ad units at the bottom of feeds for months now, first using Amazon and more recently Google AdSense to serve up ads.  And as you may know if you look at ads closely, neither of those services has done a great job making the ads truly relevant.  I can’t tell you, for example, the number of times I write a posting about a book, and the ad has absolutely nothing to do with books, let alone the book or author I’m writing about.  My favorite one was a posting Fred wrote called “Why a Conservative Turns Liberal,” with an ad called “Meet Conservative Singles” — probably not Fred’s intent, although it certainly brought a smile to my face.

Anyway, what we’re doing with Feedburner is very simple.  Our Customer Acquisition Solutions group sells lead generation products to hundreds of advertisers each month in the form of either email list rental or web-based lead gen based on categories of interest expressed by consumers who sign up with our Postmaster Direct service.  Feedburner has categorized a number of the 100,000+ feeds they publish as “Consumer Electronics” or “Computing and Technology,” which are two of the strongest categories we have, both in terms of consumers and in terms of advertisers.

So our salesforce is going to add “RSS” as an option for our advertisers in those categories, and we will work with Feedburner to insert demo-targeted ads into select feeds.  We and Feedburner both acknowledge this is an experiment, but we’re very optimistic about the results: the demographics should line up perfectly and provide our advertisers with a new channel as part of their existing campaigns.  I’m sure Dick or someone else at Feedburner will blog about it as well at some point, and if we learn anything  truly interesting after the first few months, we’ll let the world know!

Hackoff – The Blook

Fred and Brad have already posted some pertinent details as well, but here’s a must-read for you – entrepreneur Tom Evslin, who has a great blog, has just launched an online book, serialized as a blog.  It’s about a fictitious Internet bubble company called Hackoff.com (nice name!), and you can subscribe to the episodes of the book, either by RSS feed or by email.  The first episode and various subscription options are all here.

Tom’s a great writer and had front row seats/was a lead actor in the bubble.  The first episode has me hooked.  This is going to be fun!

Hackoff – The Blook, Part II

A few weeks back, I posted about a new blook (book delivered in single episodes via blog) called Hackoff.com – An Historic Murder Mystery Set in the Internet Bubble and Rubble, by Tom Evslin.  A few weeks into it, and I’m hooked.  It’s:

– complete and total brain candy, or mental floss as Brad calls it

– a great 2 minute break in the middle of the day (episodes are delivered once a day during the week)

– a very entertaining reminder about some of the wacky things that went on back in the Internet heyday

– a good look into some of the processes that go on behind the scenes in taking a company public

If you haven’t started the blook yet and want to give it a try, you can catch up on all of the first episodes and subscribe to the new ones here.   You can also preorder a hardcover copy of the book here on Amazon.com.

Counter Cliche:  How Much Paranoia is Too Much Paranoia?

Fred’s VC cliche of the week this week, Opening the Kimono, is a good one.  He talks about how much entrepreneurs should and should not disclose when talking to VCs and big partners — companies like Microsoft or Google, for example.

In response to another of Fred’s weekly cliche postings back in April, I addressed the issue of opening the kimono with VCs in this posting entitled Promiscuity.  But today’s topic is the opposite of promiscuity, it’s paranoia.

I was talking with a friend a few months back who’s a friend and fellow CEO of a high profile, larger company in a similar space to Return Path.  He was obsessing about the secrecy surrounding the size of his business and wouldn’t tell me (a friend) how much revenue his company had, even within a $20mm band.

He pursued this secrecy pretty far.  He never shared financials with his employees.  He never told anyone the metrics, not even his close friends and family.  He even withdrew his company from consideration for a high-profile award for growth companies which it had entered into and won in prior years since someone might be able to string together enough years of data to compute their size.

Why?  Because he didn’t want any venture capitalists to figure out how big they had gotten and decide to throw money at upstart competitors.  Talk about a closed kimono!

I’m much more open book than that with Return Path, but I have a tremendous amount of respect for this guy, so I gave the matter some thought.  There are certainly some situations which call for discretion, but I couldn’t come up with too many that would drive my guiding principle to be secrecy.

1. Being “open book” with employees is essential.  Your people need to know where the business stands and how their efforts are contributing to the whole.  More important, they need to know that you trust them.

2. Using some key metrics to promote your company can be very helpful.  I challenge you to show me a marketing person who doesn’t want to brag about how big you are, how many customers you have, what market share you have.

3. There’s no reason to worry about Venture Capitalists.  Sure, they can fund a competitor, but they’ll do that without knowing exactly how much revenue you have, how quickly.  The good ones are good at sniffing out market opporunities ahead of time.  The bad ones, you care about less anyway.

4. All that said, you can never be paranoid enough about the competition.  Assume they’re all out to get you at every turn, that they’re smarter, richer, quicker, and better looking than you are.  Live in fear of them eating your lunch.

Paranoia is healthy (just ask Andy Grove), but it does have its limits around the basics of your business, and around how you treat employees.

Lean In, Part II

My post about Sheryl Sandberg’s Lean In a couple months ago created some great dialog internally at Return Path.  It also yielded a personal email from Sheryl the day after it went up encouraging me to continue “talking about it,” as the book says, especially as a male leader.  Along those lines, since I wrote that initial post, we’ve had a few things happen here that are relevant to comment on, so here goes.

We partnered  with the National Center for Women & IT to provide training to our entire organization on unconscious bias.  We had almost 90% of the organization attend an interactive 90 minute training session to explore how these biases work and how to discuss these issues with others.   The goals were to identify what unconscious bias is and how it affects the workplace, identify ways to address these barriers and foster innovation, and provide practice tools for reducing unconscious biases.   While the topic of unconscious bias in the workplace isn’t only about gender, that’s one major vector of discussion.  We had great feedback from across the organization that people value this type of dialog and training.  It’s now going to be incorporated into our onboarding program for new employees.

Second, as I committed to in my original post, we ran a thorough gender-based comp study.  As I suspected, we don’t have a real issue with men being paid more than women for doing the same job, or with men and women being promoted at different rates.    That’s the good news.  However, the study and the conversations that we had around it yielded two other interesting conclusions.  One is that that we have fewer women in senior positions than men, though not too far off our overall male:female ratio of 60:40.  On our Board, we have no women.  On our Executive Committee, we have 1 of 10 (more on this below).  On our Operating Committee, we have 8 of 25.  Of all Managers at the company, we have 32 of 88.  So women skew to more junior roles.

The other is that while we do a good job on compensation equity for the same position, it takes a lot of deliberate back and forth to get to that place.  In other words, if all we did was rely on people’s starting salaries, their performance review data, and our standard raise percentages, we would have some level of gender-based inequality.  Digging deeper into this, it’s all about the starting point.  Since we have far more junior/entry level women than men, the compensation curve for women ends up needing to be steeper than that of men in order to level things out.  So we get to the right place, but it takes work and unconventional thinking.

Finally, I had an enlightening process of recruiting two new senior executives to join the business in the past couple of months.   I knew I wanted to try and diversify my executive team, which was 25% female, so I made a deliberate effort to focus on hiring senior women into both positions.  I intended to hire the best candidate, and knew I’d only see male candidates unless I intentionally sourced female candidates.  For both positions, sourcing with an emphasis on women was VERY DIFFICULT, as the candidate pools are very lopsided in favor of men for all the reasons Sheryl noted in her book.  But in both cases, great female candidates made it through as finalists, and the first candidate to whom I offered each job was female – both superbly qualified.  In both cases, for different reasons I can’t go into here, the candidates didn’t end up making it across the finish line.  And then in both cases, when we opened up the search for a second round, the rest of the candidate pool was male, and I ended up hiring men into both roles.  Now my resulting exec team is even more heavily male, which was the opposite of my intention.  It’s very frustrating, and it leaves us with more work to do on the women-in-leadership topic, for sure.

So…some positives and some challenges the last few months on this topic at Return Path.  I’ll post more as relevant things develop or occur.  We are going to be doing some real thinking, and probably some program development, around this important topic.

I received in the mail yesterday (by overnight priority mail, no less), a 400+ page prospectus from Mittal, a Dutch company in which I apparently own a few shares of stock through a managed mutual fund I’m part of. This book was BIG – well over 2 inches thick and big enough to have a binding strip instead of staples. And it had enough legalese in it to put anyone to sleep.

What did I do with it? After ranting about how silly it was to ever print such a thing for mass push distribution to an audience that largely doesn’t care about it — straight into the trash. With a big thud, of course.

What a ridiculous waste. Why print it on paper at all? Make it available online via pdf. Email shareholders or send them a postcard or leave an automated voicemail and ask them if they want a hard copy. Figure out which shareholders are in a managed fund, and send a single copy to the fund manager, since the individuals don’t even know they’re shareholders or don’t make decisions about individual stocks in the fund. Do something that costs less and doesn’t destroy trees that 99% of people will never read.

Shame on Mittal and their bankers, proudly displayed on the cover of the book — Goldman Sachs, Citigroup Credit Suisse, HSBC and Societe General.