You Have to Throw a Stone to Get the Pond to Ripple

This is a post about productive disruption.  The title comes from one of my favorite lines from a song by Squeeze, Slap & Tickle.  But the concept is an important one for leaders at all levels, especially as businesses mature.

Founders and CEOs of early stage companies don’t disrupt the flow of the business.  Most of the time, they ARE the flow of the business.  They dominate the way everything works by definition — product development, major prospect calls, client dialog, strategy, and changes in strategy.  But as businesses get out of the startup phase and into the “growth” phase (I’m still trying to figure out what to call the phase Return Path is in right now), the founders and CEO should become less dominant.  The best way to scale a business is by not being Command Central any longer – to build an organization capable of running without you in many cases.

Organizations that get larger seek stability, and to some extent, they thrive on it.  The kinds of people you hire into a larger company aren’t accustomed to or prepared for the radical swings you get in startups.  And the business itself has needs specifically around a lack of change.  Core systems have to work flawlessly.  Changes to those systems have to go off without a hitch.  Clients need to be served and prospects need to be sold on existing products.  The world needs to understand your company’s positioning and value proposition clearly — and that can’t be the case if it’s changing all of the time.  Of course innovation is required, both within the core and outside of it, but the tensions there can be balanced out with the strengths of having a stable and profitable core (see my colleague George Bilbrey’s guest post on OnlyOnce a couple months back for more discussion on this point).

Despite all of this required stability, I think the art of being a leader in a growth organization is knowing when and how to throw that stone and get the pond to ripple — that is, when to be not just disruptive, but productively disruptive.

If done the right way, disruption from the top can be incredibly helpful and energizing to a company.  If done the wrong way, it can be distracting and demotivating.  I’ve been in environments where the latter is true, and it’s not fun.  I think the trick is to figure out how to blaze a new trail without torching what’s in place, which means forcing yourself to exercise a lot of judgment about who you disrupt, and when, and how (specifically, how you communicate what it is you’re doing and saying — see this recent post entitled “Try It On For Size” for a series of related thoughts).

Here are a few ideas for things that I’d consider productive disruption.  We’ve done some or shades of some of them at Return Path over the years.

• Challenge everyone in the organization or everyone on your team to make a “stop doing” list, which forces people to critically evaluate all their ordinary processes and tasks and meetings and understand which ones are outdated, and therefore a waste of time
• With the knowledge and buy-in of the group head, kick off an offsite meeting for a team other than the executive team by presenting them with your vision for the company three years down the road and ask them to come back to you in a week with four ideas of how they can help achieve that vision over time
• If you see something going on in the organization that rubs you the wrong way, stop it and challenge it.  Do it politely (e.g., pull key people aside if need be), but ask why it’s going on, how it relates to the company’s mission or values as the case may be.  It’s ok to put people on the defensive periodically, as long as you’re asking them questions more than advocating your own position

I’m not saying we have it all figured out.  I have no doubt that my disruption is a major annoyance sometimes to people in the organization, and especially to people to report to me.  And I’ll try to perfect the art of being productive in my disruption.  But I won’t stop doing it — I believe it’s one of the engines of forward progress in the organization.

Email Articles This Week

I know, not a real inspired headline.  There are two interesting articles floating around about email marketing this week.  I have a few thoughts on both.

First, David Daniels from Jupiter writes in ClickZ about Assigning a Value to Email Addresses.  David’s numbers show that 71% of marketers don’t put a value on their email addresses.  I think that may be an understatement, but it’s a telling figure nonetheless.  David’s article is right on and gives marketers some good direction on how to think about valuing email addresses.  The one thing he doesn’t address explicitly, though, is how to think about the value of an email address in the context of a multi-channel customer relationship.  Customer Lifetime Value is all good and well, but the more sophisticated marketers take the next step and try to understand by customer (or segment) how valuable email is relative to other channels.

Second, David Baker writes in Mediapost’s Email Insider about Finding New Customers Via Email.  The column is a nice discussion of how important email is to retaining customers.  We at Return Path completely agree.  However, the question Baker posed at the beginning is not well addressed — “Should I use email to find new customers?”

My company works with hundreds of smart marketers every week who say, “Yes!  Because it’s effective, cost efficient and is the only way to combine the relevancy of search with the power of online advertising.”

I applaud Baker’s note of caution to marketers planning to acquire customers via email.  It’s always a good idea to plan the campaign with the same diligence you plan any marketing outreach — making sure the targeting, message, design and offer are all optimized for the prospect interest and the medium.

However, I take great issue with his conclusion that email acquisition marketing “does more harm than good.”  Our clients disprove this claim every day.  Email prospecting done well includes a synergy of organic, viral and paid techniques.  Consumers and business professionals still want to receive relevant and informative offers via email.  More than 50,000 of them sign up every DAY for email offers from Return Path alone.

Poeple who have failed list rental tests (and there are lots of them) need to ask some hard questions of their campaign strategy, their creative, their list rental partner, and their agency.  Did you try to send the same message and design to a list of prospects as you do to your house file?  No wonder no one got the message, they don’t even know you.  Was your list double opt-in?   Did you segment the list by interest category or demographics?  Perhaps your message was mis-targeted.  Did your landing page make it easy to take advantage of the offer?  Did you test on a small portion of the list before blasting the entire file?  Did you optimize your subject line to ensure higher open rates?  Did you try to do too much?  The golden rule of email list rental is “one email, one message.”

The success of many marketers using list rental today can not be ignored.  Done well, email acquisition is extremely powerful.  And, the addition of new lead generation, co-registration and offer aggregation opportunities create even more custom and targeted opportunities to connect with prospects.

It’s too easy to dismiss something that didn’t work two years ago by blaming the medium.  Instead, recognize that old experience for what it was.  A well-intentioned effort to test out a new medium, that didn’t work because many tried to apply practices from other media to it.  Times have changed, and email acquisition has proven its value.

Stick with Daniels’ article, figure out how valuable an email address can be for you, then go out and collect as many of them as you can from customers and prospects who will be all-too-willing to give them to you in exchange for content, offers, and other points of value.

Memory Lane or Dark Alley?

We had an interesting meeting today.  A small group of the old-timers at Return Path, including one of our founders who doesn’t work at the company any longer, convened a summit to brainstorm ways to reinvent our original, original business, Email Change of Address (ECOA).

For those of you who don’t know what it is, ECOA is a very simple idea — that people who change email addresses need help updating their personal and business contacts, and also their most trusted commercial email newsletter relationships.  It’s a free service for consumers, and a paid service for opt-in email marketers and publishers who use our service to reacquire their customers with renewed permission and a shiny new email address.

When we created ECOA in 1999, we were sure it was the proverbial $100 million idea (what idea wasn’t in 1999?).  More than six years later, the product is a success and profitable, but it never took off with that explosive growth we all imagined early on.  Return Path has grown a lot since then, both organically and through M&A, and since about 2002 or early 2003, we basically put the ECOA business on “auto-pilot,” tending to it as needed and making sure it still worked well for consumers and clients and was adequately competitive in the market, but no longer investing meaningfully in its growth.

Now that we’re much larger and have the time and resources to put into it, we decided earlier this year to pay some attention to our neglected first child and see what we could do with it.  Today’s meeting was the first step, and boy was it interesting.

So I can’t decide whether the process of preparing for and going through this meeting was like a pleasant walk down Memory Lane…or a scary run through a Dark Alley late at night.  It was fun having a conversation about a part of the business that was so important to us at one time in our lives (it was all we had!), and the group of us were literally reminiscing in the meeting about all the different thoughts and ideas we had for the business over time, as well as about different former colleagues who worked with us on the business.  At the same time, it was pretty painful to look at some of our original projections for market size and of course business size — not to mention some of the marketing efforts, Powerpoint templates, logos, and names that fell by the wayside.

The good news is, either way, we do have lots of great ideas for how to move the ECOA business forward con gusto…so look for more news on this front as the year unfolds.

Over the years,  I’ve had a list of nagging questions every time I’ve contemplated my board, but didn’t have anyone I could turn to who had deep, broad advice on this topic. Those questions were:

• How big should my board be at this stage?  
• How many independent directors should I have? 
• What is the right profile of an independent director? 
• How many options should I give a board member? 
• How do I find the best, diverse, talent for my board openings?

That’s why Bolster is excited to announce the launch of our first CEO tool: Board Benchmarking. This application (which is free!) is the first of a series of tools that we’re designing to help CEOs understand the performance, design, and impact of themselves, their executive teams, and their boards. The results of this first application will shed light on the independence, diversity, and compensation of private company boards that’s never been available on a broad basis before.

Why are we starting with Board Benchmarking?

1. Increasing Board Diversity is top of mind right now…
   …and that means CEOs need to have a handle on three things at the same time to get it right:  appropriate board size/number of independent seats, a talent pipeline that is diverse and well vetted, and clear compensation guidelines for independent directors.  Diverse employee populations and customer bases start with having a diverse board and a CEO (you!) who is attuned to the benefits of diversity at the top.  The longer you wait to prioritize diversity in the boardroom, the harder it becomes to change the makeup of your board. Culture becomes entrenched, recruiting becomes driven by referrals, and before you know it, everyone in an organization looks and thinks a little bit the same way. By capturing data on the diversity and composition of startup boards, we hope to offer an industry-wide snapshot to help CEOs start to have what can often be tricky conversations with their VCs about board size and composition as early as possible. And by pairing that with Bolster’s unique marketplace for diverse and vetted Board-ready talent, we hope to help CEOs slay all three dragons (number of independent seats, talent pipeline, and comp guidelines) at the same time.

2. Private company board composition is notoriously tricky to benchmark.
   Unlike public companies, which are required to disclose the identities and compensation packages for their boards of directors, private board structure tends to remain…well, private! While this makes sense from a regulatory perspective, it often means private companies CEOs are taking a shot in the dark when it comes to things like when to add independent directors and how much to pay them. By aggregating and anonymizing thousands of data points across hundreds of private companies, we hope to (for the first time ever) provide CEOs with a very real, in-the-moment look at how their board today stacks up against others in similar cohorts.

3. Filling an open board seat is a high-priority item for a CEO, and a tough one to get right.
   It’s said that good choices come from good options.  Early benchmarking results show that half of startup CEOs expect to fill an open board position within the next 12 months. Just as it’s critically important to get the right executives around your (well, now virtual) table, it’s equally, if not even more  important to build a board that effectively supports you, your company, and your customers. Every month that goes by with a board vacancy is another month where you’re potentially leaving valuable introductions and perspectives on the table. We hope that by exposing these board searches across such a broad subset of companies, we’ll also empower CEOs to take immediate next steps to fill those vacancies — including help recruiting multiple board candidates directly from the Bolster network.

As we conduct this survey over the next month, we’ll provide greater visibility into the size, composition, diversity, and director compensation of private company boards. We’re also establishing robust pipeline partnerships to amplify board-ready talent from organizations with diverse membership of African American, Hispanic/Latinx, and women orgs. So for anyone interested in adding qualified diverse talent to their boards, we’ll be ready.

Participants who complete the survey will receive early access to your benchmark results and a comprehensive guide to building and managing your Board of Directors. 

In early Q1, we’ll invite all participants of our Board Benchmarking survey to log in to Bolster and view their results interactively. CEOs will be able to see how their own boards stack up compared to others in the VC portfolio network or other cohorts. VC partners will be able to see patterns across the entire portfolio. 

Watch this space in the coming days and weeks for CEO-specific content about hiring Board members. 

We invite you to register as a Bolster client to participate in our Board Benchmarking survey today.

Beyond CAN-SPAM:  The Nightmare Continues

Turn back the clock to the end of 2003.  A bunch of states had recently passed their own anti-spam bills, and California had just passed the then-notorious SB186.  Commercial emailers were freaking out because compliance with a patchwork of state laws for email is nearly impossible given the nature of email and given the differences between the laws.  The reult of the freakout was an expedited, and decent, though far from perfect, federal law called CAN-SPAM which, among other things, preempted most of the individual state laws under the interstate commerce clause.  Most of us noted that the federal government had never worked so swiftly in recent memory.

Now it’s mid-2005, and a new cycle of state email legislation craziness is underway, this time with Michigan and Utah in the lead.  Once again, the legislation is well-intentioned but incredibly impractical.  I haven’t heard an appropriate amount of kicking and screaming about this yet, so let me give it a shot.

The laws themselves are billed as “Child Protection Acts.”  They ban email advertising (and also other electronic forms of advertising, like IM, phone, fax) to minors for things like guns, liquor, gambling, porn, tobacco, and — one of the kickers — “anything else deemed to be harmful to minors or unlawful for minors to purchase.”  The bans are in place even if the child has requested the advertising.  The proposed solution is an email address registry of chidren’s email addresses which would act as a suppression list for mailers, is run by a third party, and costs a $7 CPM per suppression run, per state, based on the size of the input file, not the size of the matches.

Let me start running down the problems here:

1. The laws won’t work comprehensively, as people have to proactively register their addresses with state registries.

2. The laws won’t do squat to prevent international or fraudulent advertisers from hitting children with their ads.

3. People with multi-purpose “family” email addresses will have to make a black-and-white decision about being on the registry.

4. Compliance will be a nightmare.  Since emailers usually don’t have a state tied to an email address, they will have to suppress their entire file against each state’s registry.

5. Charging based on the size of the input file as opposed to the number of matches is ridiculous.  It punishes mailers with large files and is completely divorced from the “value” of the service.

6. The costs are outrageous when you add them up.  A $7 CPM seems low, but multiply it by 12 months (and some people think compliance means more than monthly suppression runs) and now multiply it by at least 2 states — with another 10 or so considering similar legislation, and all of a sudden, a mailer could be paying as much as $1 per name ON THEIR FILE per year.

7. The laws are too vague and potentially too broad.  A law that prevents advertising of anything else deemed to be harmful to minors or unlawful for minors to purchase has some weird and possibly unintended definition consequences.  One example:  apparently, in Michigan, it is illegal to sell cars to minors (odd for a state that includes Detroit and licenses drivers at age 16) — so automobile advertising is a “banned category.”  Another example:  Amazon sells DVDs that are Rated R — does that mean linking to Amazon is now problematic?

8. Anyone can sue — not just state AGs, so look out for a zillion nuisance lawsuits like the old Utah “no popup” law of 2003.

9. The laws may be unconstitutional for any number of reasons, and they may also be in conflict with CAN-SPAM’s supersede clause.

The kicker?  The laws are billed as “Child Protection Laws” — so who the heck is going to stick out their neck and sue the states to force the legality issue?  I’m all for protecting our children…and for eliminating spam for that matter, but I’m sick of governments passing laws with this level of unintended consequences.  Someone ought to make a law about that!

I realize I haven’t posted much lately.  As you may know, the title of this blog, OnlyOnce, comes from a blog post written by my friend and board member Fred Wilson from Union Square Ventures entitled You Are Only a First-Time CEO Once, which he wrote back in 2003 or 2004.  That inspired me to create a blog for entrepreneurs and leaders.  I’ve written close to 1,000 posts over the years, and the book became the impetus for a book that another friend and board member Brad Feld from Foundry Group encouraged me to write and helped me get published called Startup CEO:  A Field Guide to Scaling Up Your Business back in 2013.

Today is a special day in my entrepreneurial journey and in the life of the company that I started back in 1999 (last century!), Return Path, as we announce that Return Path has entered into a definitive agreement to be acquired by an exciting new company called Validity.  Press release is here.

Over almost 20 years, we’ve built Return Path into one of the largest and (I think) most respected companies in the email industry.  We’ve had a culture of innovation that has led to some groundbreaking products for our customers and partners to help make email marketing work better for consumers as well as marketers, and to help keep inboxes safe and clean for mailbox providers and security companies.  

But the company is unusual in many respects.  One of those is longevity. I’m not sure how many Internet companies started in 1999 are still private, backed and led by the same team the whole time, and generally in the same business they started in.  Another is our values-driven “People First” culture. From Day 1, we have believed that if we attract and retain and develop and invest in the best people, we will make our customers successful with great products and service, and that if we do right by our customers, we will do right long term by our shareholders.  While I know that not every employee who ever walked through our doors had a great experience, I know most did and hope that all of them realize we tried our best. Finally, I’m proud that our company gave birth to a non-profit affiliate Path Forward a few years back at the hands of executives Andy Sautins, Cathy Hawley, and Tami Forman.  Path Forward helps parents get back to work after a career break and helps companies improve their gender diversity and hiring biases and has already been a game changer for dozens of companies and hundreds of women.

Today, Return Path serves almost 4,000 customers in almost every country on the globe, with $100 million in revenue, profitable, and excited about the next leg of our brands’ and our products’ lives in the care of Validity.  If you haven’t heard of Validity before today, watch out – you will hear a LOT about them in the weeks and months ahead. They are an incredibly exciting new company with a vision to help tens of thousands of companies across the globe improve their data quality but also help them use data to improve business results.  That vision, inspired by a new friend, CEO Mark Briggs, is a wonderful fit for Return Path’s products and services and people.

To finish this post where I started, Fred’s exact words in that post which got this blog going were:

What does this mean for entrepreneurs and managers? It means that the first time you run a business, you should admit what you are up against. Don’t let ego get in the way. Ask for help from your board and get coaching and mentoring. And recognize that you may fail at some level. And don’t let the fear of failure get in the way. Because failure isn’t fatal. It may well be a required rite of passage.

All of that is true and has been great advice for me over the years.  But Fred left out one important piece, which is that entrepreneurs need to constantly thank the people around them who either work their butts off as colleagues in the business or who give them helpful advice and coaching.  Return Path’s journey has been a long one, longer than most, and the full list of people to thank is too long for a blog post.

I’ve noted Fred and Brad in this post already and I want to thank them and also thank Greg Sands from Costanoa Ventures, the third member of our “dream team” investor syndicate, for their friendship and unwavering support and good counsel for me and Return Path for almost two decades, as well as many other board members we’ve had over the years including long-time independent directors Jeff Epstein, Scott Petry, and Scott Weiss.

I want to thank my co-founders Jack Sinclair and George Bilbrey, and anyone who has ever been on my executive team, including long-time execs Ken Takahashi, Shawn Nussbaum, Cathy Hawley, Dave Wilby, Anita Absey, Angela Baldonero, Andy Sautins, Louis Bucciarelli, Mark Frein, and David Sieh.  There’s nothing quite like being in the proverbial foxhole with someone during a battle or two or ten to forge a tight bond. I want to thank Andrea Ponchione, my extraordinary assistant for 14 years, who keeps me running, sane, and smiling every day. I want to thank my executive coach Marc Maltz and the members of my CEO Forum for allowing me to be unplugged and for their friendship and advice.  I want to thank all of Return Path’s 430 employees today and over 1,300 ever for their hard work in building our company and culture together and for our 4,000 customers and partners for putting their faith in us to help them solve some of their biggest challenges with email.

Finally, no thank you list for this journey would be complete without saying a special thank you to my wonderful wife Mariquita and kids Casey, Wilson, and Elyse.  They deserve some kind of special honor for being inspirational cabin-mates on the entrepreneurial roller coaster without ever being asked if they were up for it.

This event may inspire me to begin writing more regularly again on OnlyOnce.  Stay tuned!

Collaboration is Hard, Part I

Every year when we do 360 reviews, a whole bunch of people at all levels in the organization have “collaboration” identified as a development item.  I’ve been thinking a lot about this topic lately and will do a two-part post on this.  So, first things first…what is collaboration and why is it so important?

Let’s start with the definition of collaboration from our friends at Wikipedia:

Collaboration is a process defined by the recursive interaction of knowledge and mutual learning between two or more people who are working together, in an intellectual endeavor, toward a common goal which is typically creative in nature. Collaboration does not necessarily require leadership and can even bring better results through decentralization and egalitarianism.

What does that mean in a business setting?  It means partnering with a colleague (either inside or outside of the company) on a project, and through the partnering, sharing knowledge that produces a better outcome than either party could produce on his or her own.  Interestingly, the last sentence of the definition implies that collaboration can happen across levels in an organization but is generally more effective when the parties who are collaborating are on somewhat equal footing.

Why is collaboration important?  There are probably a zillion reasons.  Let me take a stab at what I think are three important ones:

1. It’s not about hard assets any more. In a knowledge economy/company, sharing information and learnings is critical.  And that’s what’s at the heart of the collaborative process.  Each person in the organization does a different job; even those who are in the same role have different experiences with their role and different interactions both internally and externally as a result.  A collaborative process that by definition involves learning drives the organization forward and to a better place.  An example…if you have a deep working knowledge of your product, and your counterpart in marketing has a deep working knowledge of public relations, collaborating on a PR strategy to launch the product’s latest feature means that you will learn more about public relations and your colleague will learn more about your product.  In the end, you both get smarter, and the collective intellect of your organization grows — so your company gains incremental advantage over the competition as a result.
2. No man is an island. Most functions and business units are in some way interdependent.  Think back to the example of product and PR above.  Both parties learn through collaboration and make things better for the future.  Here’s the rub, though — the collaboration in that example is the only way to produce the right outcome.  So the prior point illustrates offense, but this one illustrates defense.  Failure to collaborate in this simple case would lead to a misguided PR launch strategy for the new product feature.  Either product would dictate the release strategy and text — missing some important subtleties about what reporters will/won’t pick up or without thinking through how different constituencies will react to the messaging — or PR would dictate the release strategy and timing — missing important but subtle points of competitive differentiation in the product features or botching a market-specific window for the announcement.
3. Leverage is king. If the first point illustrates offense (collaboration moves the organization forward) and the second one illustrates defense (failure to collaborate suboptimizes the quality of results), this one illustrates productivity (perhaps a subset of offense).  Collaboration gives leverage, which in turn gives productivity.   Let’s not pick on our poor product and PR people this time, though.  Let’s think about one of the most difficult things to do, which is to hire good people.  As I wrote a few years ago in The Hiring Challenge, the three things to do when hiring (which are all hard) are defining the job properly, finding the time to do it right, and remembering that the process doesn’t stop on the person’s first day on the job.  So where does collaboration come in?  Once your company is big enough to have a good HR person or team, the collaborative approach to having them help you with recruiting is the best option.  Sure, you can “throw it over the wall” to HR — give them a job title and location and comp range and see what happens.  And you will get some candidates, some of which might be ok.  Or you can forget about HR and try to do it yourself and not have time to get it right.  Or you can collaborate, bring HR into the discussion about the need for the position, the skills required, and the fit with your organization, even write a job description with HR and discuss which companies or types of companies you want to see on candidates’ resumes — and voila!  HR can go off and do 10x the work at 10x the quality.  For a little more up-front effort than the “throw it over the wall” approach, you leveraged yourself tremendously through what can be a very time consuming process.

Although my examples are by nature from my own industry for the past 12+ years, it’s hard to think of too many organizations or industries where collaboration isn’t critical to success.  Even in companies like investment banks or strategy consulting firms, which traditionally are very hierarchical, command-and-control organizations filled with brilliant individual contributors, the most successful companies (think Goldman Sachs, McKinsey) are the ones that seem to foster more collaboration than others in the development of their people and the development of shared intellectual capital that helps drive the organization forward and ahead of its competition.

In Part II, I’ll answer the title question here…why is collaboration hard?  Stay tuned!

Macroeconomics for Startups

I’m not an economist.  I don’t play one on TV.  In fact, I only took one Econ class at Princeton (taught by Ben Bernanke, no less), and I barely passed it.  In any case, while I’m not an economist, I do read The Economist, religiously at that, and I’ve been reading so much about macroeconomic policies and news the past 18 months that I feel like I finally have a decent rudimentary grip on the subject.  But still, the subject doesn’t always translate as well to the average entrepreneur as microeconomics does – most business people have good intuitive understandings of supply, demand, and pricing.  But who knows what monetary policy is and why they should care?

So here’s my quick & dirty cut at Macroeconomics for Startups.  What do some of the buzzwords you read about in the news mean to you?

· Productivity Gains – This is something frequently cited as critical to developed economies like ours in the US.  Here’s my basic example over the past 10 years.  When I left my job at MovieFone in 1999, there were approximately eight administrative assistants in a company of 200 people – one for each senior person.  Today, Return Path has less than one administrative assistant in a company of the same size.  We all have access to more tools to self-manage productivity than we used to.  Cloud computing is another great example here of how companies are doing more with less. We have tons of software applications we use at Return Path, none of which require internal system administration, from Salesforce.com for CRM to Intacct for accounting. Ten years ago, each would have required dedicated hardware and operational maintenance.

· Fiscal Policy vs. Monetary Policy –  Fiscal Policy is manipulating the economy through government taxing and spending.  Monetary Policy is manipulating the economy by controlling interest rates and money supply.  For a small company that has revenue and accounts receivable, you probably are more inclined to Monetary Policy as it has more to do with your ability to access debt capital from banks through credit lines.  But if you’re in an industry where government grants or support is critical, Fiscal Policy can mean more to you in the short run.  Of course, if you’re losing money as many startups are, business tax credits and the like aren’t so relevant.

· Inflation – As my high school econ teacher defined it, “too many dollars chasing too few goods.”  Inflation may seem like a neutral thing for a business – your costs may be going up, but your revenue should be going up as well, right?  And we can inflate our way out of debt by simply devaluing our currency, right?  The main problem with inflation is that too much of it discourages investment and savings, which has negative long term consequences.  To you, rapid inflation would mean that the money you raise today is worth a lot less in a year or two.  That said, inflation is certainly better than Deflation, which can paralyze an economy.  Think about it like this – if you’re in a deflationary environment, why would you spend money today if you think prices will be lower tomorrow?

· Strong Dollar, Weak Dollar – Sounds like one of those things that’s politically explosive…of course we all want a strong dollar, right?  Why have a mental image of Uncle Sam that’s anything other than muscular?  And yes, it’s a lot more fun to travel to Europe when a latte costs you $4, not $8.  But the reality is that a strong dollar doesn’t necessarily serve all our interests well.  For a startup, sure, you can buy an offshore development team in India for less money than a development team in Silicon Valley, and for a more established company it makes it much cheaper to try and expand to Europe and Asia.  But an artificially strong dollar means that few people outside the US can afford to buy your product or service.  This is related to…

· Trade Surplus/Deficit and Exchange Rates – The net of a given country’s exports minus imports, and how much one currency is worth in terms of the other.  There’s been much talk lately about whether and how much China is manipulating its currency and holding it down, and if so, what impact that has on the global economy.  Why should you care?  If China is articifically keeping the value of the yuan down, it just means that the Chinese people can’t afford to buy as much stuff from other countries – and that other countries have an artificial incentive to buy things from China.  If the Chinese government allowed the yuan to appreciate more, the exchange rate vs. the dollar would rise, and your product or service would find itself with a lot more likely buyers in the sea of 1.3B people that is China.

I’m sure there are other terms of note and startup applications, but these are a handful that leap to mind.

Best CEO/Entrepreneur Quote Ever, By a Mile

I’ve seen and heard a lot of these.  But perhaps it’s fitting that on Independence Day, I realized that this gem of a quote, not specifically about entrepreneurs or CEOs but very applicable to them, comes from President Theodore Roosevelt in his “Citizenship in a Republic” speech at the Sorbonne in Paris, April 23, 1910:

It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.

Amen, Brother Teddy.  This quote is so good that it appears twice independently (once from me, once in a contributor’s sidebar) in my almost-ready-to-pre-order book, Startup CEO.  In fact, let me quietly take this opportunity to start a bit of a hashtag movement around the topic at #startupceo.  More to come on this next week!

As we wrote in Bolster’s Founding Manifesto, one of the reasons we started Bolster was to create a new way; a faster, easier, and more cost-effective way, for startup and scaleup CEOs to grow their boards of directors and make them more diverse.

There’s a lot of research out there that the more independent a board is, the better it performs for companies — and that there’s a high degree of correlation between more independent boards and higher performing companies as well. There’s also a lot of research out there that shows that teams which have diversity of gender and race/ethnicity perform better. And everyone who has ever been on a high-functioning board of directors knows that a board is a team.

These facts are well known, yet it is still the case that most private company boards are overwhelmingly made up of founders and investors who are still largely white and male. I believe that the lack of independence and diversity on boards is a big miss for the whole startup ecosystem, and it’s a part of the startup game that we at Bolster want to help change.

Startup boards are tricky things. One of the very unique aspects of a CEO’s job that sets it apart from other executive positions is building and leading a board of directors. But most startup CEOs have either little or no experience building and leading a board, so that part of the job tends to default to a “because that’s the way I assume it’s always been done” kind of task. Of course, if you’re not intentional about building and managing a board, you’re likely to get lousy results. 

Building, shaping, and leading a world class board is one of the single most important things startup CEOs can do to help their businesses thrive and become industry leaders. It’s on par with building and leading an executive team. I’ve seen amazing companies held back by weak and ineffective boards and investor syndicates, and I’ve seen so-so companies succeed because the strategic advice, experience, and accountability coming out of the board room drives the management team in extraordinary ways.

So how is Bolster helping startup CEOs change the game with respect to Boards? We are doing three things. 

First, as you know, what gets measured gets managed. Our first-of-its-kind Board Benchmark application will soon produce an industry standard set of data around private company boards. You can’t find data on private company boards but we’ll soon have important data like size, composition (independents/management/investors), independent director compensation and diversity (gender/race-ethnicity/age). This will help answer questions that I know I have had many times over the years as a CEO such as 

• How big should my board be at this stage? 
• How many independent directors should I have? 
• What is the right profile of an independent director? 
• How many options should I give a board member? 

Starting next week, we’re opening up our Board Benchmark application to any company who creates a free Bolster account. It will tell us a lot about the baseline across the ecosystem, and it will answer a lot of questions startup and scaleup CEOs have but can’t get answers to. Although this is an ongoing real-time benchmark tool, I’ll post some results here when we have enough critical mass to start reporting out.

Second, Bolster is in the talent business, and helping match VC-backed companies with a strong diverse slate of board candidates who are well-matched with their company is at the core of our business. We are already working on many searches for independent board members, and we’ll only be doing more of them as our client base and member base grow.

Finally, this blog post is the beginning of a whole series of posts about startup boards that we hope will demystify them a bit and help change the world’s thinking about how to grow them. Some of the material I will borrow from other blog posts I’ve written, or from the Board of Directors section of Startup CEO. Some will come from other influential VC and CEO bloggers and from Brad Feld and Mahendra Ramsinghani’s book Startup Boards. But much of the content will be new. And because Bolster is a two-sided marketplace, roughly half of the content will be aimed at startup CEOs and the other half at executives who are interested in serving on boards and aren’t sure how to get from where they are today into a board room. We’ll be sending out all the CEO posts as an eBook to CEOs who complete the Board Benchmark study, and all the Member posts as an eBook to Bolster members who fill out their Board profiles. I’ll post both of those eBooks here eventually as well.

For CEOs, the topics we will cover include 

• The purpose of a board
• Size and composition on boards
• Board evolution & turnover
• Diversity in the boardroom and the importance of appointing first-time directors
• What to look for in a director
• How to recruit and interview directors
• How to onboard directors, especially first time directors
• How to compensate directors
• How to build a director bench or Advisory Board
• How to evaluate your board

For executives searching for a board role, the topics we will cover include 

• What startup corporate boards look like
• How to prepare yourself to get on your first board
• Should you serve on an advisory board?
• How to interview for a Board role
• What you need to know about board compensation
• How to approach your first board meeting
• How to think about corporate governance as a board member
• How to be a great board member
• How to give advice or difficult feedback as a board member
• Making sure your voice is heard during a board meeting
• How to know if you’re doing a good job as a board member

We believe that boards can make or break a company and we intend to chart a new course for startup boards. I look forward to sharing thoughts and data with you on that topic in the weeks to come.

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.