Lucky 7, or the 7 Year Itch?

Today is the seventh anniversary of the founding of Return Path.  There are days when it feels like it’s been much longer, but most of the time, I feel like we’re still in the first quarter of the game here.  The business is completely different than what we started and what we ever thought it would be, but it’s healthy, growing, and we’re having more and more fun every day.

When I started the business, another more seasoned entrepreneur told me, "however long you think it’s going to take to build a great business — triple it."  I’m not sure how long I thought it was going to take for us to hit scale and really take off, but it certainly wasn’t this long.  It’s good to have enough stamina to stick with something that has promise, even if the early days are rough or uncertain.

I may be different from a lot of entrepreneurs, but I am not feeling the 7 Year Itch to move on, do something different, start something new.  The business is as exciting to me today as the day we started it, if not more so.  I feel like we just finished Lucky 7, and now we’re looking forward to Year 8.  As we’ve been chanting in the office today…Eight is Great!  Eight is Great!  (or as one of our European colleagues emailed me today:  fr: Huit, c’est super!  de: Acht ist wunderbar!  it: Forza otto!)

Congratulations to our team, and thanks to our team, customers, and investors for all their hard work and support these past 7 years.

Sometimes the work we do as CEOs, leaders, management teams is glamorous, and sometimes it’s not. But it all matters. One thing we tried to do at Bolster this past year is to really amp up employee benefits. The war for talent is real. The Great Resignation is real. Sometimes startups like ours have natural advantages in terms of attracting and retaining talent such as being made up of letting people in on the ground floor of something, having small teams so individual impact is easy to see, being mission-driven and full of creativity and purpose, and having equity to give that could be very valuable over time. But sometimes startups like ours have natural disadvantages around recruiting like having less certain futures, being relatively unknown to potential employees, being unable to pay huge salaries in the face of the Googles and Facebooks of the world, and having limited career path options since the teams are so small.

My co-founders and I have always been big believers in innovating People Practices. We did an enormous amount of work around this at our prior company, Return Path, which has been pretty well documented and we feel was very successful. Things like our People First philosophy of investing in our team, an extraordinary amount of transparency in the way we ran the company, a sabbatical policy, an open vacation policy, a peer recognition system, 360 reviews (I’ve written about this a lot, but I don’t have a great single post on it – this one is good enough and has some links to others), and an open expense policy.

Most of those things, when we started doing them 20 years ago, were revolutionary. We had our own version of the then-infamous Netflix deck even before we saw the Netflix deck. But today, many of those people practices are more common, not quite table stakes, but not exactly unique either. So this year when we set out to do our annual retrospective and planning process, we decided to try to innovate on a fairly standard topic for people, employee benefits. Although there’s not a lot of room for innovation on this topic, we are doing a few things that new and existing employees alike have told us are noteworthy, so I thought I would share them here.

We started by getting the basics right. We have a good solid health plan, dental plan, vision, transit benefits, etc. And we are paying 100% of the basic plan and allowing employees to pay more for a premium plan. That’s not the innovative part.

Next, we decided to max out the HSA contribution. HSAs and FSAs are some of those things that people don’t really think about, or they think “oh that’s great, employees can set aside health care expenses pre-tax.” But employer contribution to them matters, especially because the plans are portable. So we are giving people whatever the legal limit is towards their HSA, something in the neighborhood of $7k/year for a family plan or $3k for an individual plan. This is real money in people’s pockets, and it takes away from fears and concerns about health and wellness.

Next, we decided to begin addressing two things we felt were always weird quirks or inequities in benefit plans. One is the fact that employees who DO take advantage of your benefits program essentially get a huge additional amount of compensation than employees who DON’T because they are on their spouse’s plan. So we decided to give all employees who DON’T use our benefits program a monthly stipend. The amount doesn’t quite equal what we would be paying for their health insurance (which varies widely for employees based on single vs. family plans), but it’s a material number. So those people who aren’t on our plan still receive a healthcare proxy benefit from us.

Another (and the final thing I’ll talk about today) was instituting a 401k match, but doing so with a dollar cap instead of a percentage cap. Percentage caps FEEL fair, but they’re not fair since the company ends up paying more money towards the retirement plan of the people who earn the most money and who presumably need that benefit the least. The IRS tries to help do this leveling with their nondiscrimination testing, but that doesn’t come close to achieving the same outcome because it’s about employee contributions, not employer matches. By instituting a dollar cap, we are making the statement that we value all employees’ retirements equally. Incidentally, this simple change is proving to be very difficult to implement since our systems and benefits providers aren’t set up to do it, but we will persevere and find workarounds and get it right.

Investing in our people is critical to who we are as a business, and if you take your business seriously, it should be in your playbook as well. Benefits sound like a dumb area in which to innovate since they’re very common across all companies other than the percentage of the premium covered…but there’s still room for creativity even in that field.

Debunking the Myth of Hiring for Domain Expertise vs. Functional Expertise

As a CEO scaling your business, you’ll invariably want to hire in new senior people from the outside.  Even if you promote aggressively from within, if you’re growing quickly enough, you’ll just need more bodies.  And if you’re growing really fast, you will be missing experience from your employee base that you’ll need to augment.

For years, I’ve thought and heard that there’s a basic tradeoff in hiring senior people — you can hire someone with great domain expertise, or you can hire someone with great functional expertise, but it’s almost impossible to find both in the same person, so you need to figure out which is more important to you.  Would I rather hire someone who knows the X business, or someone who is a great Head of X?  Over the course of the last year, I’ve added four new senior executives to the team at Return Path, and to some extent, I’ve hired people with deep functional expertise but limited domain expertise.  Part of that has been driven by the fact that we are now one of the larger companies in the email space, so finding people who have “been there, done that” in email is challenging.

But the amount of senior hiring I’ve done recently has mostly shown me that the “domain vs. functional” framework, while probably accurate, is misleading if you think of it as the most important thing you have to consider when hiring in senior people from the outside.

What’s more important is finding people who have experience working at multiple growth stages in their prior jobs, ideally the scaling stage that you’re at as a business.  It makes sense if you stop and think about it.  If your challenge is SCALING YOUR BUSINESS, then find someone who has DONE THAT before, or at least find someone who has worked at both small companies and larger companies before.  I suppose that means you care more about functional expertise than domain expertise, but it’s an important distinction.

Looking for a new industrial-strength CFO for your suddenly large business?  Sure, you can hire someone from a Fortune 500 company.  But if that person has never worked in a startup or growth stage company, you may get someone fluent in Greek when you speak Latin.  He or she will show up on the first day expecting certain processes to be in place, certain spreadsheets to be perfect, certain roles to be filled.  And some of them won’t be.  The big company executive may freeze like a deer caught in the headlights, whereas the stage-versatile executive will invariably roll up his or her sleeves and fix the spreadsheet, rewrite the process, hire the new person.  That’s what scaling needs to feel like.

Email Checklist

Seth Godin has a great checklist up this morning of things you should ask yourself before you hit “send” on an email.  It’s a mix of personal rules and business/marketing rules, and it has some pretty entertaining things in it.  Definitely worth a quick read.

A New Season for Bonded Sender (now Sender Score Certified)

(With apologies to my non-email industry readers for such a long detailed posting)

Ah, spring.  New life is everywhere.  Winter clothes are being put away, birds are returning from their winters in the south, flowers are blooming.  We at Return Path are doing our part by announcing the “rebirth” of our Bonded Sender Program, the Internet’s largest and oldest email accreditation program, or whitelist, as Sender Score Certified.

Since we acquired Bonded Sender last fall, we’ve had the opportunity to go on a “listening tour” – talking to marketers, publishers, ESPs, ISPs, spam filtering companies, system administrators, email appliance manufacturers – you name it.  What we learned was that the program was ground-breaking when it was launched in 2002 but that it needed a makeover in order to meet the challenges that have evolved around spam and deliverability for both senders and receivers during the past few years.

Our listening tour revealed that the Bonded Sender of old had four core issues that weren’t sitting well with the Internet community at large:

1.  Data validity:  some senders questioned the accuracy of some of the application and compliance metrics used;

2.  Black box:  a complete lack of transparency led many senders to be unclear as to what was driving them to fail applications or have bonds debited;

3.  Bond:  there isn’t a purchasing department in America that knows how to post a bond or understands why they should; and

4.  Complaints:  as far as ISPs were concerned, even though mailers had to pass some serious hurdles to join the program, mailers who were in the program still managed to generate too many complaints among their end users.

A spring cleaning was in order, and we had the experts to get the job done.   The deliverability gurus inside Return Path — George Bilbrey, Tom Bartel, Robert Barclay, Leslie Price, Dan Deneweth, and others — working with a myriad of external advisors, delivered the makeover the program needed.

So today, Bonded Sender is reborn as Sender Score Certified.  We have worked hard to address all four main beefs about the program, while keeping the elements of the program that have worked well.  So here’s what you can expect of the new program.  First, what’s new and different:

1.  New and Improved Data:  the program is now powered by our newly launched Sender Score Reputation database, which George wrote about last week – a robust source of reputation information sent to us daily by scores of different sources on the Internet, including B2B and B2C, domestic and international, ISP and commercial filters;

2.  Complete transparency:  the Sender Score Reputation Monitor service allows clients to have 100% visibility into every metric tracked for the program, including some super-cool drill-down features;

3.  Bye-Bye, Bond:  these high standards make the bond unnecessary (and they really made us need to find a new name – can you imagine Bondless Sender?).   You’re either on the list, or you’re not.  The transparency makes it much easier for us to work with our clients on compliance; and

4.  Radically Reduced Complaints:  the new standards have allowed us to raise the bar on the quality of the program.  We’ve built the statistical model underlying the program to have a VERY high correlation with some leading spam filters, enabling us to remove a huge number of senders who were previously on the whitelist.  The result?  Our largest ISP user, Microsoft, reports to us a nearly 90% drop in the number of complaints in their network coming from users of the program – and that was off a very small number of complaints to begin with, relative to the rest of the email universe.

OK, you say – sounds great.  But what did we actually keep about the program?

1.  We still partner with third-party watchdog non-profit TRUSTe to perform a critical, detailed practices accreditation of incoming clients as well as help us with compliance;

2.  We still use SpamCop complaint data as one data feed for the program’s compliance – but now it’s just one of several; and

3.  We still have more than 35,000 domains, including Hotmail, MSN, Outblaze and Roadrunner, as well as users of Spam Assassin and Ironport appliances, using the program to help determine what email to let through.

So spring has sprung at Return Path for our delivery assurance business.  The Bonded Sender makeover is done, and the new Sender Score Certified is here to innovate the next generation of email accreditation and whitelists for the industry.

For more on Sender Score Certified, read our press release or the program requirements today.

The Party's Over?

American party politics have had a few major realignments over the 220 years since we adopted our Constitution.  I took a class on this in school, but that was a long time ago, and I'll never remember all the details.  What I do remember is that they're somewhat chaotic.  And that they typically take several election cycles to take root.

I think we're in the middle of one now.  Arlen Specter's decision to become a Democrat is a particularly poignant example of it, though the fact that something like only 25% of the country now identifies with the Republican party is another.  With Specter, it's not that he changed his ideology — it's that his party changed its ideology.  Whether or not you view his switch as a cynical attempt to keep his job is irrelevant.  He has been a Republican for his whole public life of more than 40 years with a fairly consistent point of view and is a very popular public servant with his constituency at large, and now he believes he can't win a primary voted in mainly by party activists against Republican opponents. 

Something I read today – either the Journal or Politico – had a quote from a Republican hardliner that is further signifying the realignment:

South Carolina Senator Jim DeMint and welcome Mr. Specter's defection as an ideological cleansing. "I would rather have 30 Republicans in the Senate who really believe in principles of limited government, free markets, free people, than to have 60 that don't have a set of beliefs."

That doesn't say much for the future of the GOP now, does it?  That said, I think prognostications of a permanent Democratic majority are unfounded. If I remember my history correctly, a realignment occurs when one party gets too powerful and too big — its opponents are the ones who realign as a check and balance.  Examples range from the Anti-Federalists becoming the original Republicans in the early 19th century, to the rise of the Whig and then Republican Party in the mid 19th century, to the Roosevelt era in the mid 20th century, to the Reagan Revolution in the late 20th century.  American politics are streaky.  Parties usually have a stranglehold on at least one branch of government for long periods of time, then a realignment shakes things up for a while, then control switches.  With the Whigs/Republicans, once they settled down with the election of Lincoln, for example, the party dominated the Presidency for 80 years, winning 6 consecutive presidential elections, 11 of 13, and 14 of 18 from Lincoln up through Franklin Roosevelt. 

I guess my point is that Republicans as we know them today may be doomed, but Democrats shouldn't spend too much time dancing on their grave.  Realignments won't take 20 years to kick in any more.  We move too quickly, information is too freely available, and public opinion is fickle.

What's the lesson here for a business?  It's all about competition.  Having a commanding market share is a great thing, but it's unusual for it to last.  Smaller competitors attack when you least expect it.  They attack in ways that you pooh-pooh based on your perspective of the world.  And they can often combine with other smaller players, whether through M&A or just alliances, in ways that challenge a leader's hegemony.  They redefine the market — or the market redefines them.

So be mindful of market realignment — whether you are CEO of the Democratic Party or CEO of you.com, Inc.  Don't focus on what people have bought from you in the past, or why.  Focus on what they'll be buying in the future, and why.

Agile Marketing, Part II

I wrote about this years ago when I was temporarily running Marketing and was noting a lot of the similarities between running contemporary Product Development and Marketing efforts.

Nick Van Weerdenburg just put up a great post called Why Marketing is Becoming Like Software Development which you should read if you run or work in, or work closely with, a marketing department.

Delicious Irony

Great coverage in The Washington Post of an ironic aspect to the auto industry's poverty plea for a government bail-out this week.

The three execs from GM, Ford, and Chrysler each took a separate private jet from Detroit to DC for the Congressional hearings for the occasion. 

I'm not a fan of Congressional hearing grandstanding and think most members of congress are asses when they do things like this, but not this time.  These guys had it coming and clearly don't have a clue about symbolism (either the importance of it or the art of it). 

The details are rich.  Read them here.  Thanks to my colleague Stephanie Miller for pointing this one out.  Yeesh.

I think Facebook is starting to get out of control from a usability perspective.  This doesn’t mean it’s not a great platform and that it doesn’t have utility.  But if the platform continues on its current path, the core system runs the risk of going sideways like its various predecessors:  GeoCities, MySpace, etc.  Maybe I’ll go in there to look for something or someone, but it won’t be a place I scroll through as part of a daily or semi-daily routine.

I wrote about this a year ago now, and while the site has some better tools to assign friends to groups, it doesn’t do any better job than it did a year ago about segregating information flow, either by group or by some kind of intelligence.

I don’t know why my home page, news feed, RSS feed, and iPhone app can’t easily show me posts from people I care about, but if it can’t do that soon enough, I will almost entirely stop using it.  Can’t Facebook measure the strength of my connections?  Can’t it at least put my wife’s posts at the top?  My usage is already way down, and the trend is clear.

And I won’t really comment on Facebook COO Sheryl Sandberg’s inane remark last week that “email is dead because young people don’t use it” other than to paraphrase two things I read on a discussion list I’m on:  “Just checked, and you still need an email address to sign-up for a Facebook account,” and “Most teens don’t buy stocks so Wall Street has no future.”  More entertaining analogies from Loren McDonald of Silverpop are listed here.

Back to…

I’m not in school any more, and as far as I can tell now, schools start before Labor Day for the most part, but it still feels like tomorrow is “back to school” for the working world. Business still hums along in August, and we’ve certainly had our hands full with one of the busiest months ever at Return Path, but somehow, the traditional end of the summer season still manages to have the trappings of a European August, with lots of people on vacation or doing more “work from home” days than usual.

As all that draws to a close today, at least for me personally, it’s Back to…lots of things:

– Back to New York! After a few weeks out of the city at our house in the mountains, it’s great to be back in Metropolis

– Back to shorter and more varied workouts! Training for my recent half marathon meant a lot of long runs and not much else. Now back to weights, pilates, elliptical, and swimming

– Back to more serious reading! I’ve read a bunch of trash over the summer. I was way overdue. My brain was starting to hurt. So I tuned out of almost all news, business books, and non-fiction for a month, and I plowed through enough murder mysteries to wallpaper a library (no doubt one populated by Colonel Mustard and Mrs. Peacock)

– Back to business! A few days and half days off and some working from home behind me, it’s time to gear up for a very busy September and October. Always busy months with industry events and pre-holiday retail client frenzy, this year will be even busier as we work to integrate our recent acquisition of Habeas as well as complete a number of other big initiatives

So happy Labor Day, which Wikipedia notes was created in 1882 and federalized in 1894 as “a day off for its working citizens.”

One of my first postings was about how challenging it can be to fire people. This is a topic that can probably consume volumes, but Jerry Colonna has just written a great piece about it for his column in Inc. that’s definitely worth a read.