Understanding the Drivers of Success

Although generally business is great at Return Path  and by almost any standard in the world has been consistently strong over the years, as everyone internally knows, the second part of 2012 and most of 2013 were not our finest years/quarters.  We had a number of challenges scaling our business, many of which have since been addressed and improved significantly.

When I step back and reflect on “what went wrong” in the quarters where we came up short of our own expectations, I can come up with lots of specific answers around finer points of execution, and even a few abstracted ones around our industry, solutions, team, and processes.  But one interesting answer I came up with recently was that the reason we faltered a bit was that we didn’t clearly understand the drivers of success in our business in the 1-2 years prior to things getting tough.  And when I reflect back on our entire 14+ year history, I think that pattern has repeated itself a few times, so I’m going to conclude there’s something to it.

What does that mean?  Well, a rising tide — success in your company — papers over a lot of challenges in the business, things that probably aren’t working well that you ignore because the general trend, numbers, and success are there.  Similarly, a falling tide — when the going gets a little tough for you — quickly reveals the cracks in the foundation.

In our case, I think that while some of our success in 2010 and 2011 was due to our product, service, team, etc. — there were two other key drivers.  One was the massive growth in social media and daily deal sites (huge users of email), which led to more rapid customer acquisition and more rapid customer expansion coupled with less customer churn.  The second was the fact that the email filtering environment was undergoing a change, especially at Gmail and Yahoo, which caused more problems and disruption for our clients’ email programs than usual — the sweet spot of our solution.

While of course you always want to make hay while the sun shines, in both of these cases, a more careful analysis, even WHILE WE WERE MAKING HAY, would have led us to the conclusion that both of those trends were not only potentially short-term, but that the end of the trend could be a double negative — both the end of a specific positive (lots of new customers, lots more market need), and the beginning of a BROADER negative (more customer churn, reduced market need).

What are we going to do about this?  I am going to more consistently apply one of our learning principles, the Post-Mortem  –THE ART OF THE POST-MORTEM, to more general business performance issues instead of specific activities or incidents.  But more important, I am going to make sure we do that when things are going well…not just when the going gets tough.

What are the drivers of success in your business?  What would happen if they shifted tomorrow?

Naked Talking

Naked Conversations:  How Blogs Are Changing The Way Businesses Talk with Consumers, by Robert Scoble and Shel Israel, would have been mildly interesting had I never read, let alone written, a blog.  So chances are if you’re reading this blog regularly, it’s not a great use of your time or money, but if you just ran across this post while trying to learn more about blogging – or really about any form of post-2002 Internet marketing – it’s probably worthwhile as a primer. But if you’re knee-deep in internet marketing or blogging, it may be a bit of a snoozer.

I find it entertaining that leading bloggers like Scoble and Israel, who are part of the ultra-small group of hardcore bloggers, as they describe, that “posts 50 times a day, mostly at 4 a.m.,” think blogs are really conversations.  Don’t get me wrong, I believe that blogs are revolutionary in that they allow anyone to run his or her own printing press.  I also think it’s critical for companies to have corporate blogs (Return Path had one of the first), for CEOs and other executives to blog (obviously I do), for companies to allow their employees to blog relatively unencumbered by corporate policy, and, perhaps most important, for companies to track and listen to what others who blog are saying about them and their products.

But let’s not get too caught up in our own euphoria as bloggers to think that what’s happening is actually a conversation the way we humans think of conversations.  Blogging allows more people to have their voices heard, and it certainly allows for transparency and authenticity, as the authors say, but there’s almost never dialog.  Many popular blogs don’t have comments at all.  Those who do allow comments have few if any posted.  And those who have comments posted rarely have any other readers who actually see the comments, since the blog is a publishing forum and RSS is a publishing format, neither is a truly interactive medium like chat.

I’m sure there are some blogs that have active commenters, particularly political ones, and hopefully someone, somewhere, reads and internalizes those comments when they’re relevant. And certainly, high circ bloggers who read and know each other participate in a dialog by talking AT each other via their blog postings, not via comments (meaning that for the “dialog” to make sense to the greater world, the greater world must read all blogs participating in a “conversation.”). But, please, let’s not pretend there is really a 20-million-way conversation happening.

Welcome to the new StartupCEO.com!

I started writing this blog in May of 2004 with an objective of writing about the experience of being a first-time entrepreneur — a startup CEO — inspired by a blog post written by my friend, long-time Board member and mentor Fred Wilson entitled “You’re only a first time CEO once.”  The blog and the receptivity I got along the way from fellow startup CEOs encouraged me to write a book called Startup CEO:  A Field Guide to Scaling Up Your Business, which was originally published in 2013 and then again as a second edition last year in 2020.

Today I am relaunching the blog as StartupCEO.com both to reflect that relevance of that brand as the book continues to get good traction in the startup ecosystem, and to reflect the fact that I’m now on my second startup as CEO, so “Only Once” doesn’t seem so fitting any more.

The web site has a very minimalist design – and I realize many of you read posts on either RSS or email — those will still operate the same as they have been (no new RSS feed).

As I approach the first anniversary of starting our new company, Bolster, where we help startup CEOs scale their teams, themselves, and their boards, I am recommitting to this blog and will try to post at least once a week.  Because there is a lot of overlap between this blog and Bolster’s blog (which I’d encourage you to subscribe to here either by email or RSS), posts will occasionally show up on both blogs, or I’ll put digests of Bolster blog posts here.  

But the Bolster blog will be broader and will also have many additional authors besides me, while this blog will remain distinct about some of the experiences I’m having as a startup CEO.

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.

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!

My name is Matt Blumberg. I am a technology entrepreneur and business builder based in New York City who just (in 2020) started a new company called Bolster.

Bolster is an on-demand executive talent marketplace that helps accelerate companies’ growth by connecting them with experienced, highly vetted executives for interim, fractional, advisory, project-based or board roles. Bolster also provides on-demand executives with software and services to help them manage their careers as independent consultants and provides startup and scaleup CEOs with software and content to help them assess, benchmark and diversify their leadership teams and boards.  We are creating a new way to scale executive teams and boards.

Before that, I started a company called Return Path, which we sold in 2019.   We created a business that was the global market leader in email intelligence, analyzing more data about email than anyone else in the world and producing applications that solve real business problems for end users, commercial senders, and mailbox providers.  In the end, we served over 4,000 clients with about 450 employees and 12 offices in 7 countries.  We also built a wonderful company with a signature People First Culture that won a number of awards over the years, including Fortune Magazine’s #2 best mid-sized place to work in 2012.

Early in my career, I ran marketing and online services for MovieFone/777-FILM (www.moviefone.com), now a division of AOL. Before that — I was in venture capital at General Atlantic Partners (www.gapartners.com), and before that, a consultant at Mercer Management Consulting (www.mercermc.com). And I went to Princeton before that.

Based on this blog, I wrote a book called Startup CEO:  A Field Guide to Scaling Up Your Business, which was published by Wiley in 2013 and updated in 2020.

I have been married for over 20 years to Mariquita, who is, as I tell her all the time, one of the all-time great wives. We have three great kids, Casey, Wilson, and Elyse.

I have lots of other hobbies and interests, like coaching my kids’ baseball and softball teams; traveling and seeing different corners of the world; reading all sorts of books, particularly about business, American Presidential history, art & architecture, natural sciences (for laymen!), and anything funny; cooking and wishing I lived in a place where I could grill and eat outdoors year-round; playing golf; lumbering my way through the very occasional marathon, eating cheap Mexican food; introducing my kids to classic movies; and playing around with new technology.

IF YOU WANT TO UNDERSTAND WHAT THIS BLOG IS ALL ABOUT, read my first two postings: You’re Only a First Time CEO Once, and Oh, and About That Picture, as well as my updated post when I relaunched the blog with its new name, StartupCEO.com.

I love having independent directors on my Board.  They are a great third leg of the stool alongside a CEO/Founder and VCs.  They provide the same kind of pattern matching and outside point of view as VCs — but from a completely different perspective, that of an operator or industry expert.  The good ones are CEOs or CXOs who aren’t afraid to challenge you.  Equally important, they’re not afraid to challenge your VCs.  At Return Path, I always had 2 or 3 independent directors at any given time to balance out VCs, and some have become great long term friends like Scott Petry, Jeff Epstein, and Scott Weiss.  At Bolster, we’re already having a great experience with our first independent, Cristina Miller, and we’re about to add a second independent.  And I’ve served as an independent director multiple times.

So as you can imagine, I was shocked by one of the headlines coming out of the Board Benchmark study we ran at Bolster across 250+ clients (detailed blog post with a bunch of charts and graphs) that only ⅓ of companies in the study have any independent directors.  Even larger companies at the Series C and D levels only have independent directors 60% and 67% of the time.  What a missed opportunity for so many companies.

Less surprising, though still sobering, were the numbers on diversity that came out of the study.  79% of the directors in the sample are white.  86% are men.  43% of boards are completely racially homogenous (most all-white) while 80% are mostly racially homogeneous (meaning only one diverse member); 56% are gender homogenous (most all men), while 87% are mostly gender homogenous (only one female).  For an industry that is spending a lot of time talking about diversity in leadership teams and on boards, that’s disappointing.

Here’s the linkage of the two topics:  The solution to the board diversity problem lies in having more independent directors, since management and VC board seats are often both “fixed” and non-diverse.  Independent seats are the easiest to fill with diverse candidates.  Conveniently, more independent directors also leads to higher quality boards.  

In partnership with some DEI experts, our study also includes some suggested actionable tips for CEOs and board leaders, which I encourage you to read. There are really three simple (IMO) steps to having more diverse boards, and there is some good news in the Bolster study around these points:

1. Add independent director seats.  50% of the companies in the survey either have or expect to have an independent board seat open within 12 months.  That’s a good start, but honestly, I can’t imagine running any board without at least 1-2 independent directors (up to 3-4 for larger companies), starting on Day 1.  Given that only ⅓ of companies in the sample have any independent board members at all, the 50% number feels quite low.
   
2. Open the recruiting funnel to include first-time directors.  Historically, companies have mainly targeted current or former CEOs or people who have board experience to be independent directors.  That is a recipe to perpetuate having mostly white male board members.  But Bolster has done a few dozen board searches so far, and 66% of those clients have expressed a willingness to take on first-time directors, as long as they are “board ready,” which we define as having been on any kind of board, not just a corporate board; having reported to a founder or CEO and had regular interaction with and presentations to a board; or having significant experience as a formal or informal advisor.  Once you widen the funnel to include all candidates who meet those criteria, you can very easily have a diverse slate of highly qualified candidates.  Bolster is a great source of these candidates (this is a real focal point for our business), but there are plenty of other online or search firm sources as well.
   
3. Have the courage to limit the number of management/investor board members.  Whether or not you can add independent board members may be a function of how many seats you have to play with in your corporate charter.  Of course, you can add seats indefinitely, but there’s no reason to have a 7-person board for your Series A company.  My rule of thumbs on this are simple:  (a) Only one founder member of the management team on the Board – more than that is a waste of a valuable board slot; and (b) VCs should always be less than 50% of your board members, so as new ones roll on, old ones should roll off – or add a VC and an independent at the same time.  Both of these take serious effort and courage, both are worth it, and both probably merit a longer blog post someday.

The Board Benchmark study also had a wealth of information about compensation for independent directors — cash vs. stock, what kind of stock, how much stock, vesting and acceleration provisions. 

Here’s a Slideshare of the full survey results, in case this and/or the Bolster blog link isn’t detailed enough for you:

If you’re interested in learning more, the survey is free to take and all the granular results (including comp benchmarks) are available to benchmark against your company if you take it. Just email me if you’re interested at [email protected].

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.

Taking Stock, Part II

Last year, I wrote about the three questions I ask myself at the beginning of every year to make sure my career is still on track. [https://onlyonceblog.wpengine.com/2012/01/taking-stock]   The questions are:

1. Am I having fun at work?
2. Am I learning and growing as a professional?
3. Is my work financially rewarding enough, either in the short term or in the long term?

This year, I am adding a fourth suggestion following a great conversation I had a bunch of months back with Jerry Colonna, a great CEO coach, former VC, and all around great person.  Question four is:

Am I having the impact I want to have on the world?

This last question was probably always implicit in my first two questions – but I like calling it out separately.  All of us have purpose in our lives and impact on others, whether it’s family, friends, colleagues, clients, or some slice of broader humanity.  Asking whether that impact is present and enough is just another check and balance on my own operating system to make sure that I’m still on track with my own goals and values.

Happy New Year!

A Culture of Appreciation

As I mentioned in my last post in the Collaboration is Hard series, we’ve tried to create a culture of appreciation at Return Path that lowers barriers to collaboration and rewards mutual successes.  We developed a system that’s modeled somewhat after a couple of those short Ken Blanchard books, Whale Done and Gung Ho! It may seem a little hokey, and it doesn’t work 100% of the time, but in general, it’s a great way to make it easy for people to say a public “thanks” to a colleague for a job well done.

The idea is simple.  We have an “award request” form on our company Intranet that any employee can use to request one of five awards for one or more of their colleagues, and the list evolves over time.  The awards are:

ABCD – for going Above and Beyond the Call of Duty

Double E – for “everyday excellence”

Crowbar – for helping someone in sales “pry our way in” to a new customer

Damn, I Wish I’d Thought of That – for coming up with a great insight for the business (credit for the name of course goes to our former colleague Andy Sernovitz)

WOOT – for Working Out Of Title and helping a colleague

Our HR coordinator Lisa does a quick review of award submissions to make sure they are true to their definitions and make sure that people aren’t abusing the system, and the awards are announced and posted on the home page of the Intranet every week and via RSS feed in near-real time.

Each award carries a token monetary value of $25-$200 paid with American Express gift checks, which are basically like cash.  We send out the checks with mini-statements to employees every quarter.

It’s not a perfect system.  The biggest shortcoming is that it’s not used evenly by different people or different groups.  But it’s the best thing we’ve come up with so far to allow everyone in the company to give a colleague a virtual pat on the back, which encourages great teamwork!

Promiscuity

I figure the title will entice someone new to read this (although he or she might be sorely disappointed with the actual content).  Fred’s posting today about VCs’ conflicts of interest, besides giving me fodder for my weekly counter-cliche posting, brings up another interesting point, one about entrepreneurs and their levels of confidentiality or secrecy about their business plans.

I heard a quote once from Vinod Khosla of Kleiner Perkins that has stayed with me for years:  that “to be successful in the new economy you must be open to the point of promiscuity.”  I think Khosla is right.  As Fred says, VCs are notorious for meeting lots of companies before making an investment, and as an entrepreneur on the other side of the table, it’s impossible to completely protect your ideas and thoughts if you want to attract outside capital.  You just have to trust that the VCs are going to be as honest as possible in how they use the information you share with them.  Same goes for potential partnerships and even M&A as well.  You simply can’t have productive conversations on those topics without opening the proverbial kimono at least a little bit.

But being promiscuous with the state secrets of your business carries certain risks as well.  If the partnership or M&A conversation goes awry, you could easily find yourself with a competitor that knows part of your game plan.  We’ve had this happen at least once at Return Path, and to this day, it still irritates the heck out of us.  But we still think we made the right decision at the time to share that information — and now at least we know that our new competitor isn’t creative enough to come up with his own ideas!

On a completely side note, anyone who’s not using desktop search like Google or the Lookout plugin for Outlook is missing out.  I couldn’t remember the exact quote from Vinod Khosla, but I remembered that it was emailed to me years ago by my colleague Mary Lynn McGrath.  It took Lookout 0.06 seconds to find the exact email from September of 2000 using keywords McGrath and Vinod.  Amazing (and thanks again, Mary Lynn!).