Steve Bayle has a similar posting to my How to Negotiate a Term Sheet posting from a couple weeks ago. While he has a lot of good points, his view is far more cynical than mine. I think an entrepreneur can be friends with his or her investors and board members and that their interests for the company are more often than not aligned. Of course an entrepreneur’s personal career goals may differ from an investor’s goals for the company, but that’s apples and oranges.

As long as both parties behave like grown ups, have a healthy dose of self-awareness, communicate openly, regularly, and clearly, and realize that successful business relationships require no less effort than successful marriages, the entrepreneur/VC relationship can work brilliantly. Call me an idealist (or maybe it’s just that I have great VCs), but entrepreneurship is all about making things a reality, isn’t it?

What a View, Part III

We are in the middle of our not-quite-annual senior team 360 review process this week at Return Path.  It’s particularly grueling for me and Angela, our SVP of People, to sit in, facilitate, and participate in 15 of them in such a short period of time, but boy is it worth it!  I’ve written about this process before — here are two of the main posts (overall process, process for my review in particular, and a later year’s update on a process change and unintended consequences of that process change). I’ve also posted my development plans publicly, which I’ll do next month when I finalize it.

This year, I’ve noticed two consistent themes in my direct reports’ review sessions (we do the live 360 format for any VP, not just people who report directly to me), which I think both speak very well of our team overall, and the culture we have here at Return Path.

First, almost every review of an executive had multiple people saying the phrase, “Person X is not your typical head of X department, she really is as much of a general business person and great business partner and leader as she is a great head of X.”  To me, that’s the hallmark of a great executive team.  You want people who are functional experts, but you also need to field the best overall team and a team that puts the business first with understandings of people, the market, internal dependencies, and the broader implications of any and all decisions.  Go Team!

Second, almost every review featured one or more of my staff member’s direct reports saying something like “Maybe this should be in my own development plan, but…”  This mentality of “It’s not you, it’s me,” or in the language of Jim Collins, looking into the mirror and not out the window to solve a problem, is a great part of any company’s operating system.  Love that as well.

Ok.  Ten down, five to go.  Off to the next one…

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.

I wrote part I of this post in 2011, and I feel even more strongly about it today. I generally keep this blog away from politics (don’t we have enough of that running around?), but periodically, I find some common sense, centrist piece of information worth sharing. In this case, I just read a great and very short book, Six Amendments: How and Why We Should Change the Constitution, by former Supreme Court Justice John Paul Stevens, that, if you care about the polarization and fractiousness going on in our country now, you’d appreciate.

If nothing else, the shattered norms and customs of the last several years should point people to the fact that our Constitution needs some revision. Not a massive structural overhaul, but some changes on the margin to keep it fresh, as we approach its 250th anniversary in the next couple decades.

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?

5 Ways to Spot Trends That Will Make You (and Your Business) More Successful

I’ve recently started writing a column for The Magill Report, the new venture by Ken Magill, previously of Direct magazine and even more previously DMNews. Ken has been covering email for a long time and is one of the smartest journalists I know in this space. My column, which I share with my colleagues Jack Sinclair and George Bilbrey, covers how to approach the business of email marketing, thoughts on the future of email and other digital technologies, and more general articles on company-building in the online industry – all from the perspective of an entrepreneur. Below is a re-post of this week’s version, which I think my OnlyOnce readers will enjoy.

Last week I published my annual “Unpredictions” for 2011. This tradition grew out of the fact that I hate doing predictions and my marketing team loves them. So we compromise by predicting what won’t happen.

But the truth is that the annual prediction ritual – while trite – is really just trend-spotting. And trend-spotting is an important skill for entrepreneurs. Fortunately it’s a skill that can be acquired, at least it can with enough deliberate practice (another skill I talk about here).

Here are five habits you should consider cultivating if being a better trend spotter is in your career roadmap.

Read voraciously. I read about 50 books every year.  About half of them are business books, and I also mix in a bit of fiction, humor, American history, architecture and urban planning, and evolutionary biology.  I keep up with more than 50 blogs and I read all the trade publications that cover email.  I also read the Wall Street Journal and The Economist regularly.  What you read is a little less important than just reading a lot, and diversely.

Use social media (wisely). Julia Child once said that the key to success in life was having great parents. My advice to you is quite a bit simpler:  make friends with smart people. Facebook, Twitter, LinkedIn and others have given us a window into the world unlike any other. Status updates, tweets, and – maybe most important of all – links shared by your network of friends and colleagues gives you a sense of what people are talking about, thinking about and working on. And you can’t just lurk.  You actually have to be “in” to get something “out.”

Follow the money. Pay attention to where money gets invested and spent. This includes keeping an eye on venture capital, private equity, and the public markets, as well as where clients (mostly IT and marketing departments) are spending their dollars and what kinds of people they are hiring. Money flows toward ideas that people think will succeed. A pattern of investments in particular areas will give you clues to what might be the big ideas over the next five to 10 years.

Get out of the office: I think it’s hugely important for anyone in business, and especially entrepreneurs, to spend time in the world to get fresh perspectives. I’m not sure who coined the phrase, but our head of product management, Mike Mills, frequently refers to the NIHITO principle – Nothing Interesting Happens in the Office.  Now that’s not entirely true – running a company means needing to spend a huge amount of time with people and on people issues, but last year I traveled nearly 160,000 miles around the world meeting with prospect, clients, partners and industry luminaries. You don’t have to be a road warrior to get this one right – you can attend events in your local area, develop a local network of people you can meet with regularly – but you do have to get out there.

Take a break. While you need information to understand trends, you can quickly get overloaded with too much data.  Trend spotting is, in many ways, about pattern recognition. And that is often easier to do when your mind is relaxed.  Ever notice that you have moments of true epiphany in the shower or while running? Give yourself time every week to unplug and let your mind recharge. As Steven Covey says, “sharpen that saw”!

Welcome to the new Return Path.

For a tech company to grow and thrive in the 21st century it must be in a state of constant adaptation. We have been the global market leaders in email deliverability since my co-founder George Bilbrey coined that term back in 2002. In fact, back in 2008 we announced a major corporate reorganization, divesting ourselves of some legacy businesses in order to focus on deliverability as our core business.  

 Since then Return Path has grown tremendously thanks to that focus, but we have grown to the point where it’s time for us to redefine ourselves once again.  Now we’re launching a new chapter in the company’s history to meet evolving needs in our marketplace. We’re establishing ourselves as the global market leaders in email intelligence. Read on and I’ll explain what that means and why it’s important.

What Return Path Released Today

We launched three new products today to improve inbox placement rate (the new Inbox Monitor,  now including subscriber-level data), identify phishing attacks (Email Brand Monitor), and make it easier to understand subscriber engagement and benchmark your program against your competition (Inbox Insight, a groundbreaking new solution). We’ve also released an important research study conducted by David Daniels at The Relevancy Group.

The report’s findings parallel what we’ve been hearing more and more recently. Email marketers are struggling with two core problems that complicate their decision making: They have access to so much data, they can’t possibly analyze it fast enough or thoroughly enough to benefit from it; and too often they don’t have access to the data they really need.

Meanwhile they face new challenges in addition to the ones email marketers have been battling for years. It’s still hard to get to the inbox, and even to monitor how much mail isn’t getting there. It’s still hard to protect brands and their customers from phishing and spoofing, and even to see when mail streams are under attack. And it’s still hard to see engagement measurements, even as they become more important to marketing performance.

Email Intelligence is the Answer

Our solution to these problems is Email Intelligence. Email intelligence is the combination of data from across the email ecosystem, analytics that make it accessible and manageable, and insight that makes it actionable. Marketers need all of these to understand their email performance beyond deliverability. They need it to benchmark themselves against competitors, to gain a complete understanding of their subscribers’ experience, and to accurately track and report the full impact of their email programs.  In fact, we have redefined our company’s mission statement to align with our shift from being the global leader in Email Deliverability to being the global leader in Email Intelligence:

We analyze email data and build solutions that generate insights for senders, mailbox providers, and users to ensure that inboxes contain only messages that users want

The products we are launching today, in combination with the rest of our Email Intelligence Solution for Marketers that’s been serving clients for a decade, will help meet these market needs, but we continue to look ahead to find solutions to bigger problems. I see our evolution into an Email Intelligence company as an opportunity to change the entire ecosystem, to make email better, more welcome, more effective, and more secure.

David’s researchoffers a unique view of marketers’ place in the ecosystem, where they want to get to, how much progress they’ve made, and how big a lead the top competitors have opened up against the rest. (It can also give you a sense of where your efforts stack up vs. the rest of the industry.) There are definitely some surprises, but for me the biggest takeaway was no surprise at all: The factors that separate the leaders are essentially the core components of what we define as Email Intelligence.

Blogiversary, Part II

So it’s now been two years since I launched OnlyOnce.  Last year at this time, I gave a bunch of stats of how my blog was going.

The interesting thing about this year, is that a lot of these stats seem to have leveled off.  I have almost the same number of subscribers (email and RSS) and unique visits as last year.  The number’s not bad — it’s in the thousands — and I’m still happy to be writing the blog for all the reasons I expressed here back in June 2004, but it’s interesting that new subs seem to be harder to come by these days.  I assume that’s a general trend that lots of bloggers are seeing as the world of user-generated content gets more and more crowded.

Not that I’m competitive with my board members, but I believe that Brad and Fred have both continued to see massive subscriber increases in their blogs.  They attribute it to two things — (1) they have lots of money they give to entrepreneurs, and (2) they write a lot more than I do, usually multiple postings per day, as compared to a couple postings per week. 

I don’t see either of those aspects of my blog changing any time soon, so if those are the root causes, then I’ll look forward to continuing this for my existing readers (and a few more here and there) into 2007!

Book (Not So) Short:  Raise Your Hand If You’re Sure

I couldn’t get the catchy jingle from the 80’s commercial for Sure deodorant (you remember, the one with the Statue of Liberty at the end of it – thanks, YouTube) out of my head while I was reading the relatively new book, Confidence: How Winning Streaks and Losing Streaks Begin and End.  Written by HBS professor Rosabeth Moss Kantor, Confidence is one of the few business books I’ve read that’s both long and worth reading in full.

The book has scores of examples of both winning and losing streaks, from sports, business, politics, and other walks of life, and it does a great job of breaking down the core elements that go into creating a winning streak or turnaround (Accountability, Collaboration, Innovation).  Kantor also puts a very fine point on the “doom loop” of losing streaks and just how hard it is to turn them around.  The book also has a good crisp definition of why winning streaks end — arrogange, anyone? — and has consistent, but not preachy recipes for avoiding pitfalls and driving success.  All in all, very inspirational, even if many of the roots of success lie in well-documented leadership qualities like those expressed in Jim Collins’ Built to Last and Good to Great.  The book is good enough that Kantor can even be forgiven for lauding Verizon, probably the most consistently awful customer service company I’ve ever dealt with.

But even more of the roots of success and disappointment around streaks are psychological, and these examples really rang true for me as I reflected back on our acquisition of the troubled NetCreations in 2004.  That company was in the midst of a serious slump, a losing streak dating back to 2000, at the peak of the original Internet boom.  Year over year, the company had lost revenues, profits, customers, and key personnel.  Its parent company saw poor results and set it into the doom loop of starving it for resources and alternating between ignoring it and micromanaging it, and when we acquired the business, we found great assets and some fantastic people (many of whom I’m proud to say are still with us today), but a dispirited, blame-oriented, passive culture that was poised to continue wallowing in decline.

I can hardly claim that we’ve turned the business around in full, or that I personally made happen whatever turnaround there has been, but I do think we did a few things right as far as Kantor and Confidence would see it.  Her formula for a turnaround (Espouse the new message, Exemplify it with leadership actions, Establish programs to systematically drive it home throughout the organization) is right in line with our philosophy here at Return Path.

First, we accelerated the separation and autonomy of a fledgeling NetCreations spin-off unit, now our Authentic Response market research group, and let a culture of collaboration and innovation flourish under an exceptionally talented leader, Jeff Mattes.

But that was the easy part (for me anyway), because that part of the business was actually working well, and we just let it do its thing, with more support from HQ.  The turnaround of the core list rental and lead generation business of NetCreations, the original Postmaster Direct, was much tougher and is still a work in progress.  In the last six months, we’ve finally turned the corner, but it hasn’t been easy.  Even though we knew lots of what had to be done early on, actually doing it is much harder than b-school platitudes or even the best-written books make it seem.

The one thing that Kantor probably gives short shrift to, although she does mention it in passing a couple times, is that frequently turnarounds require massive major amounts of purging of personnel (not just management) to take hold.  As one of my former colleagues from Mercer Management Consulting used to say, “sometimes the only way to effect Change Management is to change management.”  Sometimes even very talented people are just bogged down with baggage — the “ghost of quarters past” — and nothing you do or say can break that psychological barrier.

Boy, have we learned that lesson here at Return Path the hard way.  I’m extremely grateful to our team at Return Path, from the old RP people who’ve seen it all happen, to the old NetCreations people who are thriving in the new environment, to the new blood we’ve brought in to help effect the turnaround, for playing such important roles in our own Confidence-building exercises here.  And I’m super Confident that 2007 will be the year that we officially turn the old NetCreations/Postmaster losing streak into a big, multi-year winning streak.

Anyway, I realize this may redefine the “short” in book short, but Confidence is without question a good general management and leadership read.

Book Short:  Fixing America

I usually only blog about business books, but since I occasionally comment on politics, I thought I would also post on That Used to be Us:  How America Fell Behind in the World It Invented and How We Can Come Back, by Tom Friedman and Michael Mandelbaum (book, Kindle), which I just finished.

There is much that is good about America.  And yet, there is much that is broken and in need of serious repair.  I wrote about some thought on fixing our political system last year in The Beginnings of a Roadmap to Fix America’s Badly Broken Political System?, but fixing our political system can only do so much.  Tom Friedman, with whom I usually agree a lot, but only in part, nailed it in his latest book.  Instead of blaming one party or the other (he points the finger at both!), he blames our overall system, and our will as a people, for the country’s current problems.

The authors talk about the four challenges facing America today – globalization, the IT revolution, deficits and debt, and rising energy demand and climate change, and about how the interplay of those four challenges are more long term and less obvious than challenges we’ve faced as a country in the past, like World Wars or The Great Depression, or even The Great Recession.  The reason, according to the authors, that we have lost our way a bit in the last 20-40 years, is that we have strayed from the five-point formula that has made us successful for the bulk of our history:

• Providing excellent public education for more and more Americans
• Building and continually modernizing our infrastructure
• Keeping America’s doors to immigration open
• Government support for basic research and development
• Implementation of necessary regulations on private economic activity

It’s hard not to be in violent agreement with the book as a normal person with common sense.  Even the last point of the five-point formula, which can rankle those on the right, makes sense when you read the specifics.  And the authors rail against excessive regulation enough in the book to give them credibility on this point.

The authors’ description of the labor market of the future and how we as a country can be competitive in it is quite well thought through.  And they have some other great arguments to make – for example, about how the prior decade of wars was, for the first time in American history, not accompanied by tax increases and non-essential program cuts; or about how we can’t let ourselves be held hostage to AARP and have “funding old age” trump “funding youth” at every turn.

The one thing I disagree with a bit is the authors’ assertion that “we cannot simply cut our way to fiscal sanity.”  I saw a table in the Wall Street Journal the same day I was reading this book that noted the federal budget has grown from $2.6T in 2007 to $3.6T today – 40% in four years!  Sure sounds to me like mostly a spending program, though I do support closing loopholes, eliminating subsidies, and potentially some kind of energy tax for other reasons.

I’ll save their solution for those who read the book.  It’s not as good as the meat of the book itself, but it’s solid, and it actually mirrors something my dad has been talking about for a while now.  If you care about where we are as a country and how we can do better, read this book!

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.