A Perfect Ten
Return Path turns 10 years old today. We are in the midst of a fun week of internal celebrations, combined with our holiday parties in each office as well as year-end all-hands meetings. I thought I would share some of my reflections on being 10 in the blog as I’ve shared them with our team. What being 10 means to me – and what’s enabled us to make it this long:
- It means we’ve beaten the odds. Two major global economic meltdowns. The fact that 90% of new small businesses fail before they get to this point. Probably a higher percentage of venture backed startups fail before they get to 10 as well
- We’ve gotten here because we’ve been nimble and flexible. Over our 10 years, we’ve seen lots of companies come and go, clinging to a model that doesn’t work. We may have taken a while and a few iterations to get to this point, but as one of my Board members says, “we’re an overnight success, ten years in the making!”
- We’ve also made it this long because we have had an amazing track record with our three core constituencies – employees, clients, and investors – including navigating the sometimes difficult boundaries or conflicts between the three
What I’m most proud of from our first decade:
- We’ve built a great culture. Yes, it’s still a job. But for most of our team members most of the time, they like work, they like their colleagues, and they have a fun and engaging time at work. That’s worth its weight in gold to me
- We’ve built a great brand and have been hawkish about protecting our reputation in the marketplace. That’s also the kind of thing that can’t be bought
- We haven’t sacrificed our core principles. We’ve always, going back to our founding and the ECOA business, had a consumer-first philosophy that runs deep. This core principle continues to serve us well in deliverability (a non-consumer-facing business) and is clearly the right thing to do in the email ecosystem
What I most regret or would do differently if given the chance:
- We have not raised capital as efficiently as possible – mostly because our company has shifted business models a couple of times. Investors who participated in multiple rounds of financing will do very well with their investments. First or second round angel investors who didn’t or couldn’t invest in later rounds will lose money in the end
- I wish we were in one location, not five. We are embracing our geographic diversity and using it to our advantage in the marketplace, but we pay a penalty for that in terms of travel and communication overhead
- We have at times spread ourselves a little too thin in pursuit of a fairly complex agenda out of a relatively small company. I think we’re doing a good job of reigning that in now (or growing into it), but our eyes have historically been bigger than our stomachs
Thanks to all our investors and Board members, especially Greg Sands from Sutter Hill Ventures, Fred Wilson from Flatiron Partners and Union Square Ventures, Brad Feld from Mobius Venture Capital, and Scott Weiss for their unwavering support and for constantly challenging us to do better all these years. Thanks to our many customers and partners for making our business work and for driving us to innovate and solve their problems. Thanks to our many alumni for their past efforts, often with nothing more to show for it than a line item on their resume. And most of all, thanks to our hardworking and loyal team of nearly 200 for a great 2009 and many more exciting years ahead!
Why I joined the DMA Board, and what you can expect of me in that role
Why I joined the DMA Board, and what you can expect of me in that role
I don’t normally think of myself as a rebel. But one outcome of the DMA’s recent proxy fight with Board member Gerry Pike is that I’ve been appointed to the DMA’s Board and its Executive Committee and have been labeled “part of the reform movement” in the trade press. While I wasn’t actively leading the charge on DMA reform with Gerry, I am very enthusiastic about taking up my new role.
I gave Gerry my proxy and support for a number of reasons, and those reasons will form the basis of my agenda as a DMA Board member. As a DMA member, and one who used to be fairly active, I have grown increasingly frustrated with the DMA over the past few years.
1. The DMA could be stronger in fighting for consumers’ interests. Why? Because what’s good for consumers is great for direct marketers. Marketing is not what it used to be, the lines between good and bad actors have been blurred, and the consumer is now in charge. The DMA needs to more emphatically embrace that and lead change among its membership to do the same. The DMA’s ethics operation seems to work well, but the DMA can’t and shouldn’t become a police state and catch every violation of every member company. Its best practices and guidelines take too long to produce and usually end up too watered down to be meaningful in a world where the organization is promoting industry self-regulation. By aggressively fighting for consumers, the DMA can show the world that a real direct marketer is an honest marketer that consumers want to hear from and buy from.
2. Despite a number of very good ideas, the DMA’s execution around interactive marketing has been lacking. The DMA needs to accept that interactive marketing IS direct marketing – not a subset, not a weird little niche. It’s the heart and soul of the direct marketing industry. It’s our future. The acquisition of the EEC has been one bright spot, but the DMA could do much more to make the EEC more impactful, grow its membership, and replicate it to extend the DMA’s reach into other areas of interactive marketing, from search to display advertising to lead generation. The DMA’s staff still has extremely limited experience in interactive marketing, they haven’t had a thought leader around interactive on staff for several years, and their own interactive marketing efforts are far from best practice. Finally, the DMA’s government affairs group, perhaps its greatest strength, still seems disproportionately focused on direct mail issues. The DMA should maintain its staunch support of traditional direct marketers while investing in the future, making interactive marketing an equal or larger priority than traditional direct marketing. We have to invest in the future.
3. Finally, I think the DMA suffers from a lack of transparency that doesn’t serve it well in the hyper-connected world we live in here in 2009 – that’s a nice way of saying the organization has a big PR problem. The organization does a lot of great work that never gets adequately publicized. This whole proxy fight episode is another example, both in the weak response from the DMA and also in a lot of the complaints Gerry lodged against the organization, many of which the organization says are untrue or misleading. Senior DMA execs or Board members should be blogging. They should be active thought leaders in the community. They should be much more engaged with their members to both understand member needs and requirements and more aggressively promote their agenda.
In short, I will be an independent voice who advocates for progress and change in the areas that I consider to be most important, and I will be transparent and open about expressing my views. I’ve already been clear with the existing DMA Board and management that I do have this agenda, and that I hope the organization will embrace it. If they do, even if only in part, I think it will be to the DMA’s benefit as well as the benefit of its members. If they reject it wholesale, my interest in long-term involvement will be fairly low.
That’s the story. As I said up front, I am taking up this new role with enthusiasm and with the belief that the DMA is open to change and progress. We’ll see how it goes, and I will blog about it as often as I can.
Do you have thoughts on the future of the DMA? I’d love to hear from you. You can leave a comment below or email me directly at matt at returnpath dot net.
Less is More
Less is More
I have a challenge for the email marketing community in 2009. Let’s make this the Year of “Less is More.”
Marketers are turning to email more and more in this down economy. There’s no question about that. My great fear is that just means they’re sending more and more and more emails out without being smart about their programs. That will have positive short term effects and drive revenues, but long term it will have a negative long term impact on inboxes everywhere. And these same marketers will find their short term positive results turning into poor deliverability faster than you can say “complaint rate spike.”
I heard a wonderful case study this week from Chip House at ExactTarget at the EEC Conference. One of his clients, a non-profit, took the bold and yet painful step of permissioning an opt-out list. Yikes. That word sends shivers down the spine of marketers everywhere. What are you saying? You want me to reduce the size of my prime asset? The results of a campaign done before and after the permission pass are very telling and should be a lesson to all of us. The list shrank from 34,000 to 4,500. Bounce rate decreased from 9% to under 1%. Spam complaints went from 27 to 0 (ZERO). Open rate spiked from 25% to 53%. Click-through from 7% to 22%. And clicks? 509 before the permissioning, 510 after. This client generated the same results, with better metrics along the way, by sending out 87% LESS EMAIL. Why? Because they only sent it to people who cared to receive it.
This is a great time for email. But marketers will kill the channel by just dumping more and more and more volume into it. Let’s all make Less Is More our mantra for the year together. Is everyone in? Repeat after me…Less Is More! Less Is More!
Book Short: The Little Engine that Could
Book Short: The Little Engine that Could
Authors Steven Woods and Alex Shootman would make Watty Piper proud. Instead of bringing toys to the children on the other side of the mountain, though, this engine brings revenue into your company. If you run a SaaS business, or really if you run any B2B business, Revenue Engine: Why Revenue Performance Management is the Next Frontier of Competitive Advantage, will change the way you think about Sales and Marketing. The authors, who were CTO and CRO of Eloqua (the largest SaaS player in the demand management software space that recently got acquired by Oracle), are thought leaders in the field, and the wisdom of the book reflects that.
The book chronicles the contemporary corporate buying process and shows that it has become increasingly like the consumer buying process in recent years. The Consumer Decision Journey, first published by McKinsey in 2009, chronicles this process and talks about how the traditional funnel has been transformed by the availability of information and social media on the Internet. Revenue Engine moves this concept to a B2B setting and examines how Marketing and Sales are no longer two separate departments, but stewards of a combined process that requires holistic analysis, investment decisions, and management attention.
In particular, the book does a good job of highlighting new stages in the buying process and the imperatives and metrics associated with getting this “new funnel” right. One that resonated particularly strongly with me was the importance of consistent and clean data, which is hard but critical! As my colleague Matt Spielman pointed out when we were discussing the book, the one area of the consumer journey that Revenue Engine leaves is out is Advocacy, which is essential for influencing the purchase process in a B2B environment as well.
One thing I didn’t love about the book is that it’s a little more theoretical than practical. There aren’t nearly enough detailed examples. In fact, the book itself says it’s “a framework, not an answer.” So you’ll be left wanting a bit more and needing to do a bit more work on your own to translate the wisdom to your reality, but you’ll have a great jumping off point.
Book short: Life Isn’t Just a Wiki
Book short: Life Isn’t Just a Wiki
One of the best things I can say about Remote: Office Not Required, by Jason Fried and David Heinemeier Hansson, is that it was short. That sounds a little harsh – part of what I mean is that business books are usually WAY TOO LONG to make their point, and this one was blessedly short. But the book was also a little bit of an angry rant against bad management wrapped inside some otherwise good points about remote management.
The book was a particularly interesting read juxtaposed against Simon Sinek’s Leaders Eat Last which I just finished recently and blogged about here, which stressed the importance of face-to-face and in-person contact in order for leaders to most effectively do their jobs and stay in touch with the needs of their organizations.
The authors of Remote, who run a relatively small (and really good) engineering-oriented company, have a bit of an extreme point of view that has worked really well for their company but which, at best, needs to be adapted for companies of other sizes, other employee types, and other cultures. That said, the flip side of their views, which is the “everyone must be at their cubicle from 9 to 5 each day,” is even dumber for most businesses these days. As usual with these things, the right answer is probably somewhere in between the extremes, and I was reminded of the African proverb, “If you want to go fast, go alone. If you want to go farm go together” when I read it. Different target outcomes, different paths.
I totally agree with the authors around their comments about trusting employees and “the work is what matters.” And we have a ton of flexibility in our work at Return Path. With 400 people in the company, I personally spend six weeks over the summer working largely remote, and I value that time quite a bit. But I couldn’t do it all the time. We humans learn from each other better and treat each other better when we look at each other face to face. That’s why, with the amount of remote work we do, we strongly encourage the use of any form of video conferencing at all times. The importance of what the authors dismiss as “the last 1 or 2% of high fidelity” quality to the conversation is critical. Being in person is not just about firing and hiring and occasional sync up, it’s about managing performance and building relationships.
Remote might have been better if the authors had stressed the value that they get out of their approach more than ranting against the approaches of others. While there are serious benefits of remote work in terms of cost and individual productivity (particularly in maker roles), there are serious penalties to too much of it as well in terms of travel, communication burden, misunderstandings, and isolation. It’s not for everyone.
Thanks to my colleague Hoon Park for recommending this to me. When I asked Hoon what his main takeaway from the book was, he replied:
The importance of open communication that is archived (thus searchable), accessible (transparent and open to others) and asynchronous (doesn’t require people to be in the same place or even the same “timespace”). I love the asynchronous communication that the teams in Austin have tried: chatrooms, email lists (that anyone can subscribe to or read the archives of), SaaS project management tools. Others I would love to try or take more advantage of include internal blogs (specifically the P2 and upcoming O2 WordPress themes; http://ma.tt/2009/05/how-p2-changed-automattic/), GitHub pull requests (even for non-code) and a simple wiki.
These are great points, and good examples of the kinds of systems and processes you need to have in place to facilitate high quality, high volume remote work.
New People Electrify the Organization
New People Electrify the Organization
We had a good year in 2009, but it was tough. Whose wasn’t? Sales were harder to come by, more existing customers left or asked for price relief than usual, and bills were hard to collect. Worse than that, internally a lot of people were in a funk all year. Someone on our team started calling it “corporate ennui.” Even though our business was strong overall and we didn’t do any layoffs or salary cuts, I think people had a hard time looking around them, seeing friends and relatives losing their jobs en masse, and feeling happy and secure. And as a company, we were doing well and growing the top line, but we froze a lot of new projects and were in a bit of a defensive posture all year.
What a difference a year makes. This year, still not perfect, is going much better for us. Business conditions are loosening up, and many of our clients have turned the corner. Financially, we’re stronger than ever. And most important, the mood in the company is great. I think there are a bunch of reasons for that – we’re investing more, we’re doing a ton of new innovation, people have travel budgets again, and people see our clients and their own friends in better financial positions.
But by far, I think the most impactful change to the organizational mood we’re seeing is a direct result of one thing: hiring. We are adding a lot of new people this year – probably 60 over the course of the year on top of the 150 we had at the beginning of the year. And my observation, no matter which office of ours I visit, is that the new people are electrifying the organization. Part of that is that new people come in fresh and excited (perhaps particularly excited to have a new job in this environment). Part of it is that new people are often pleasantly surprised by our culture and working environment. Part of it is that new people come in and add capacity to the team, which enables everyone to work on more new things. And part of it is that every new person that comes in needs mentoring by the old timers, which gives the existing staff reminders and extra reason to be psyched about what they’re doing, and what the company’s all about.
Whether it’s one of these things or all of them, I’m not sure I care. I’m just happy the last 18 months are over. The world is a brighter place, and so is Return Path. And to all of our new people (recent and future), welcome…thanks for reinvigorating the organization!
Two Great Lines (and One Worrisome One) About the Current Macroeconomic Situation
I was trading emails a few weeks ago Elliot Noss from Tucows about the current state of the economy after being on a panel together about it, and he wrote:
The market is fascinating right now. Heated competition AND layoffs and hiring freezes. It feel like an old European hotel where there are two faucets, one is too hot and the other too cold.
While a quick rant about European hotel bathrooms could be fun…we’ll just stick to the sink analogy. As anyone who has ever tried to use one of these sinks that Elliot describes knows, they’re hard to use and illogical. Sure, sometimes you want freezing water and sometimes you want scalding water (I guess), but often, you want something in between. And the only way to achieve that is to turn on both freezing and scalding at the same time? That’s weird.
Then I was on another email thread recently with a group of CEOs, when John Henry from Ride With Loop said this:
Whatever the climate, we all surely agree there is no bad time to build a good business.
How true that is!
But here’s the worrisome part. It’s impossible to predict what’s going to happen next. We are in uncharted territory here with a land war in Europe, a partial global oil embargo of a top tier oil producer, a pandemic, supply chain problems, etc. etc. There are days and circumstances where everything feels normal. Plenty of businesses, especially in the tech sector, are kicking ass. And yet there are days and circumstances that feel like 2001 or 2009. It’s tough to navigate as a startup CEO. Yes, it’s obvious you should try to have a couple years of cash on hand, and that you should be smart about investments and not get too far ahead of revenue if you’re in certain sectors (presumably if you’re in an R&D intensive field and weren’t planning to have revenue for years on end, life isn’t all that different?). But beyond that, there’s no clear playbook.
And that’s where the worrisome line comes in. I saw Larry Summers on Meet the Press last weekend, who predicted that
a recession would come in late 2023.
Wait, what? Aren’t things messed up now? Yes, inflation is high, the stock market is down, and interest rates are creeping up. But the economy is still GROWING. Unemployment is still LOW. Summers’ point is a reminder that contraction is likely, but it may still be a ways off, it depends how the Fed handles interest rate hikes (and about a zillion other things), and it’s impossible to predict. That was more worrisome to me. If we’re navigating choppy waters now, it may not just be for a couple of quarters. It may be that 4-6 quarters from now, we are in for 2-3 quarters of contraction. That is a more than most companies are able to plan for from a cash perspective.
Frothy macro environments lead to bad businesses getting created, too many lookalike businesses popping up, or weak teams getting funded. When the tide goes out, as they say, you can see who is swimming naked. But if you’re building a good business, one that has staying power and a clear value proposition, with real people or clients paying real money for a real product or service, and if you’re serious about building a good company, keep on keeping on. Be smart about key decisions, especially investment decisions, but don’t despair or give up.
We’ll all get through this.
Ratcheting Up Is Hard To Do (or Boiling the Frog, Part II)
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.
Reboot – Where do a company’s Values come from, and where do they go?
I’ve written a lot over the years about Return Path’s Core Values (summary post with lots of links to other posts here). And I’ve also written and believe strongly that there’s a big difference between values, which are pretty unchanging, and culture, which can evolve a lot over time. But I had a couple conversations recently that led me to think more philosophically about a company’s values.
The first conversation was at a recent dinner for a group of us working on fundraising for my upcoming 25th reunion from Princeton. Our guest speaker was a fellow alumnus who I’ve gotten to know and respect tremendously over the years as one of the school’s most senior and influential volunteer leaders. He was speaking about the touchstones in his life and in all people’s lives — things like their families, their faith, the causes they’re passionate about, and the institutions they’ve been a part of. I remember this speaker giving a similar set of remarks right after the financial crisis hit in early 2009. And it got me thinking about the origins of Return Path’s values, which I didn’t create on my own, but which I obviously had a tremendous amount of influence over as founder. Where did they come from? Certainly, some came from my parents and grandparents. Some came from my primary and secondary education and teachers. Some came from other influences like coaches, mentors, and favorite books. Although I’m not overly observant, some certainly came from Hebrew school and even more so from a deep reading of the Bible that I undertook about 15 years ago for fun (it was much more fun than I expected!). Some came from other professional experiences before I started Return Path. But many of them either came from, or were strongly reinforced by my experience at Princeton. Of the 15 values we currently articulate, I can directly tie at least seven to Princeton: helpful, thankful, data-driven, collaborative, results-oriented, people first, and equal in opportunity. I can also tie some other principles that aren’t stated values at Return Path, but which are clearly part of our culture, such as intellectually curious, appreciative of other people’s points of view, and valuing an interdisciplinary approach to work.
As part of my professional Reboot project, this was a good reminder of some of the values I know I’ve gotten from my college experience as a student and as an alumni, which was helpful both to reinforce their importance in my mind but also to remember some of the specifics around their origins – when and why they became important to me. I could make a similar list and trade and antecedents of all or at least most of our Company’s values back to one of those primary influences in my life. Part of Reboot will be thinking through all of these and renewing and refreshing their importance to me.
The second conversation was with a former employee who has gone on to lead another organization. It led me to the observation I’ve never really thought through before, that as a company, we ourselves have become one of those institutions that imprints its values into the minds of at least some of its employees…and that those values will continue to be perpetuated, incorporated, and improved upon over time in any organization that our employees go on to join, manage part of, or lead.
That’s a powerful construct to keep in mind if you’re a new CEO working on designing and articulating your company’s values for the first time. You’re not just creating a framework to guide your own organization. You’re creating the beginning of a legacy that could potentially influence hundreds or thousands of other organizations in the future.
The Gift of Feedback
The Gift of Feedback
My colleague Anita Absey always says that “feedback is a gift.” I’ve written in the past about our extensive 360 review process at Return Path, and also about how I handle my review and bring the Board in on it. But this past week, I finished delivering all of our senior staff 360 reviews, and I received the write-up and analysis of my own review. And once again, I have to say, the process is incredibly valuable.
For the first time in a long time this year, I got a resounding “much improved” on all of my prior year’s development items from my team and from the Board. This was great to hear. As usual, this year’s development items are similarly thoughtful and build on the prior ones, in the context of where the business is going. Since one of my prior year’s items was “be as transparent as possible,” I thought I’d share my development plan for the coming 12-18 months here on my blog. If you’re reading this and you report to me, you’ll get a longer form debrief at our next offsite.
1. Continue making the organization more of a Hedgehog, lending more focus to our mission and removing distractions wherever possible.
2. Move the organization’s leadership team from “pacesetting” to “authoritative” management styles by focusing more on :
a. standards of excellence around employee behavior and performance: develop a more clear performance management system, raise the bar on accountability around leadership and management issues, shift management training from tools to values-based coaching
b. clear communication loops: balance open door policy with manager empowerment by getting the executive in charge to fix issues (instead of fixing them myself) and/or facilitating stronger manager-employee communication
c. constant translation of vision into execution: foster clearer context and deeper employee engagement by not just communicating vision, but communicating HOW the vision becomes reality at every opportunity
3. Sharpen elbows further around leadership team: identify key attributes of success, weed out underperformers, re-scope other roles, and clarify “partner for success” opportunities as part of core responsibilities. Make each individual’s development needs public in the senior team (I guess this is the first step towards that!)
4. Make the organization more nimble, inspiring a bias for action through shifts in priorities and cross-functional swat teams where required
So there you go. If you work at Return Path, please feel free to hold my feet to the fire in the coming months on these points!
Blog Blacklists: A New View of Internet Vigilantes
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.