These thoughts often come to mind as we interact with someone we don’t know well, perhaps trying to process how their actions or words fit into a grander scheme. We are, after all, naturally skeptical mammals.
I am typically on the receiving end of people guessing, incorrectly, about the motives behind my activities, particularly as they relate to advocating for political reform or public policy.
Running as an independent candidate for New York’s 22nd Congressional District in 2016 certainly seemed out of character from my background as a high growth Silicon Valley entrepreneur and active startup investor. Campaigning on a jobs and education platform, this was less a surprise to those closer to me who were aware of my efforts in catalyzing a regional ecosystem through non profit Upstate Venture Connect.
That independent candidacy, however improbable, was indeed the perspective-shaping experience I knew it would be. Like most of my ventures, I learned and I grew. The experience sharpened my focus on how I could help my community. Even though I had previously dabbled in public policy advocacy, putting myself into the ring against both major parties in a hotly contested Federal election gave me insights I could never have gleaned from the outside looking in.
My big take-aways were not only how rigged the political system is in favor of candidates inside the 2 party duopoly, but also understanding conflict our elected officials face in seeking to make bold decisions that interfere with party interests. Actions like these can often come with the potential risk of being “primaried” out of office by an extreme candidate (left or right) who caters to the rabid few voters turning out to vote in low turnout party primaries.
Playing the Long Game
Prior to my 2016 campaign, I had no awareness of New York’s unique fusion voting rules that permit a single candidate to gather votes on more than one line of the ballot. By being attractive to all candidates to list on as many lines as possible, this system actually gives minor parties more influence here than in many other states. That understanding was a key reason for my running as an independent, and in launching the Upstate Jobs Party with a long term goal of becoming ballot eligible state wide.
The initiative to grow UJP has steadily chugged along these last five years, cultivating one relationship at a time to join our insurgent movement that now focuses on bipartisanship policy making, election reform and yes – job creation policies that make sense in the real world.
While slow and steady across a mix of multiple initiatives has been my approach for the last decade, the January 6 insurrection was the game changer prompting me to now engage with a much larger chunk of my personal time and resources on this political reform path.
The fact that the insurrection occurred in the first place is a testament to just how broken the political system has become – and it shined a light on the reality that the entrenched powers have no incentive or means to bring about the needed changes or seek compromise between the two major parties.
While many say “There’s nothing we can do about it” – I’ve always been one of the crazy few that believe the most important change will come from the people, not from entrenched politicians.
This is hard stuff and requires steady, long term leadership commitment. That translates to building community, bringing people together behind shared goals of strengthening our economy and democracy. We invest our energy not because of an economic interest, but because we’re passionate about making a difference in something bigger than ourselves.
Those are the kind of challenges that I am personally drawn to – I want to make a difference and leave this world a better place than I found it. It’s all the more motivating because I know so many others feel the same way about wanting to fix a broken system, but haven’t yet found that right path to be spurred into action and engaged.
As an entrepreneur, my talents are best put to that community organizing side seeking to play some small part in helping catalyze a movement still in nascent stages.
So there is no mystery to my motive. You can be assured I won’t be running for public office – but instead will continue my journey on this road less travelled, no matter how many say we can’t make a difference.
“Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.” – Margaret Mead
Much coverage of Tony Hsieh’s legacy has been, deservedly, about his business success. After all, Tony’s incredible track record in leading Zappos has been hailed by corporate and leadership experts for creating a fanatical company culture passionately committed to teamwork and customer service in a way that powered sustained growth over his 21 year tenure as CEO.
Entrepreneurs everywhere revered Tony for staying true to his vision and values in how he did that. Notably, he was the only example we could point to as a super successful entrepreneur not being Amazon’d after being acquired by Jeff Bezos in 2009 for $1.2 billion.
But the story not being given much attention is how Tony’s vision and values pointed the company, and others, to join him in making a social impact with a private sector driven experiment for rebuilding the dead end Las Vegas neighborhood of Fremont East — resulting in a community movement he spawned known as theDowntown Project (DTP).
Zappos started in the Bay Area, but in 2004 moved headquarters to the Las Vegas suburban community of Henderson. The appeal for Zappos was driven by a lower cost structure to scale up the company’s primary teams of customer service, logistics and support workers needed to fill all those online orders.
As the company grew, employees spread across different buildings in a suburban business park and with even faster growth anticipated following Amazon’s acquisition, the forecasted needs for more space spurred planning for a corporate campus that would be supportive of the company’s quirky and purpose driven culture.
Instead of pursuing the conventional path of another suburban location, Tony chose to head into a decaying urban neighborhood believing that immersing his team on a mission of looking outward to build community around them would strengthen company culture and innovation, eventually leading to redefining Zappos company purpose as “Delivering Happiness” across their 4 C’s of Clothing, Customer Service, Culture, and Community.
With that purpose in mind, as Tony explored urban Las Vegas he was struck by the long vacant and deteriorating former City Hall building and its surrounding neighborhood of Fremont East. So began the odyssey to bring about transformational change that his vision, and Zappos values, would drive to be a legacy extending far beyond the company itself.
How does one guy inject purpose, vision and values into a strategy for building community?
Following Zappos’ 2014 move into the awesomely renovated former City Hall building, Tony Hsieh described the strategy as being focused on scaling up efforts behind Downtown Project’s (DTP) own 3 C’s:
Collisions: Serendipity that happens when people being in the right place at the right time result in starting of a new relationship that blossoms into downstream impact
Co-learning: People in the community teaching each other — including mentoring and helping at a person to person level without necessarily a paid role
Connectedness: The number and depth of connected relationships in the neighborhood
With this strategy, Tony and DTP’s private investors invested $200 million in real estate, $50 million in small businesses, $50 million in education, and $50 million in tech startups. The impact today includes 407 ongoing or completed construction projects, 61 small business investments and an estimated 130,000 annual visitors for the Life is Beautiful Festival and DTP-related entities.
More than the numbers, it’s the impact on life in Fremont East that can best be experienced by actually visiting there and talking with residents, many of whom have had their lives change as a direct result of the transformational change DTP had on the community.
Inspiring example for others
I had only been an occasional visitor to Las Vegas, not paying attention to the community. But as a Silicon Valley entrepreneur who boomeranged back to my Upstate New York hometown, I was on my own community building journey helping others start and grow companies in the newer industries across the downtrodden Upstate NY region.
Ever on the prowl for following innovators with similar goals, I started tracking news on DTP — particularly Tony’s thinking behind how engineering conditions could get more of the right people bumping into each other resulting in “creative collisions” that would ultimately lead to meaningful relationships entrepreneurs needed to find resources like mentors, investors, team members and customers.
That experience mapped directly to my own startup history beginning in the late 80’s as a rookie entrepreneur with zero relationships in the tech community. After some difficult initial struggles, it was the pivot towards targeting emerging tech that got me plugged into the openness and pay it forward nature of Silicon Valley. Those Silicon Valley creative collisions then led to my growing TriNet to what has evolved to become a NYSE listed company with $4 billion in annual revenues.
Along the course of that journey I relocated my family from Silicon Valley to my hometown in Upstate New York. By 2013, my non profitUpstate Venture Connect was in our third year of building a connected network across the state. We adopted a mantra of scaling up the volume and quality of creative collisions as a core strategy filter for choosing where we would put our energy and resources.
So I was elated to come across anEntrepreneurs’ Organization conference in Las Vegas with Tony keynoting on building community and an optional tour of the Downtown Project. Both were highly impactful for me, culminating with a debriefing in the DTP war room located in Tony’s apartment when he strolled in to chat with us fellow entrepreneurs and shared his personal insights “off stage” that gave us a true measure of the man he was.
In the years since, UVC’s community has grown to more than 16,000 people across our Upstate region, slowly evolving towards the connected community we envision. I recentlypublished More Good Jobs, a book that shares that experience and outlines strategies for those who are trying to retain their city’s top talent. Yet in writing the book, I somehow missed mentioning Tony Hsieh. I’d been using the term creative collision so frequently over the last eight years that I even forgot to give attribution to Tony for both the concept and execution focus to make it work.
There was no bravado about his own role in creating DTP. Tony’s view was that it was all a community effort that he just helped bring together a few of the right people who were now making things happen.
Tony Hsieh’s story of the Downtown Project is rich and deserves to be told. Tony shouldn’t be remembered as just a renowned entrepreneur, but also as a community builder whose leadership continues to shape downtown Las Vegas and individual lives there.
Across America, there are lots of talent exporting cities with leaders looking for options on how they might do better at retaining their city’s top talent instead of watching the next generation move away in search of opportunities in the newer industries.
In hearing Tony’s story, who knows how many more people like me will be inspired to pick up where he left off. Orchestrating high impact creative collisions inside communities is one path Tony pioneered that can help us make a difference in impacting quality of life at scale.
As with so many other things that happened over 2020, this Thanksgiving is like no other we’ve ever experienced before.
With baby boomer parents now passed, my own tradition of a large, extended family gathering has not been an obligatory event – but truly a special family celebration that together with my six siblings, we all looked forward to combining our families each year.
Since we’ve chosen this year to celebrate at an individual, rather than combined family level, it’s a much quieter day that finds me reflecting about both Thanksgiving and the bigger picture of how gratitude shapes perspective well beyond the holiday.
We know origins of America’s first thanksgiving celebration trace back to the Pilgrims, but the official holiday wasn’t declared until the depths of the Civil War in 1863. This was a time of struggles with unspeakable tragedy prompted by political divisions which tore the fabric of our country apart.
While my own family has been spared the ravages of Covid-19, we’re sensitive to so many others who’ve suffered personal trauma and loss. And our just completed election has been the most divisive in memory, dividing even to a family level in ways we’ve never seen before.
Early Roman era philosopher Cicero wrote about gratitude being more than “the greatest virtue,” it is also “the mother of all other virtues.”
Over the centuries since Cicero, many others have looked at the connection between our expressing gratitude and positive outcomes in our lives that may follow. Scholars have taken that to another level by looking to validate this connection through research based approaches such as you’ll find in this white paper on The Science of Gratitude.
A few mentions include:
It’s easy to feel grateful when life is good, but when disaster strikes, gratitude is worth the effort
A lot to chew on for sure. But as I think back to the values my father helped instill in our family, the example he set in showing gratitude throughout his daily life was perhaps one of the most important things that has now been passed on to me and my siblings, and in turn to our next generation.
It will be a special part of our Thanksgiving dinner today to be reminiscing about my Dad’s expressions of gratitude, including through some challenging times for the family.
Writing this post also puts me on a committed path to being more explicit and consistent in my own expression of gratitude through what I do going forward.
Everything seemed normal as my day began. Residual winds from Hurricane Eta had subsided, the sun was out and I enjoyed a quiet breakfast overlooking the ocean from our Key West terrace.
This was the big day of the year for non profit Upstate Venture Connect with our annual conference Upstate Unleashed. It’s the only event we do and over the last five years UVC built a strong following of bringing leaders together from throughout the entire Upstate New York region – all for the purpose of sharing experience and strengthening relationships aligned with our mission of connecting startup entrepreneurs to the resources they need to launch and grow companies in the newer industries.
Due to Covid restrictions we moved the entire conference format to virtual. For us, this meant putting lots of energy into not just a line-up of speakers, but getting attendees up to speed on taking advantage of a structured program to request virtual meetings with speakers, top entrepreneurs, investors and startup community leaders.
Our registrations blew past 500 people and almost 400 virtual meetings were scheduled through the conference platform – a huge validation of our strategy to get people connected.
My principal conference role was to moderate a discussion with our keynote speaker Brad Feld about his latest book The Startup Community Way. I was totally jazzed about the opportunity as Brad’s themes in building startup community were very much our inspirational roadmap for so much of what we’ve done this last decade in building UVC’s network across the region to now number more than 16,000 people.
In addition to my speaking with Brad and taking in the other conference sessions, I also accepted invites from 10 conference attendees to have a virtual one on one meetings. So this was to be full day of virtual meetings I was really looking forward to.
No Internet No Phone
As I began powering up shortly after 8am, I lost internet service and while starting to troubleshoot my home network, also realized I had no mobile signal. After checking multiple devices on both Verizon and AT&T mobile services, the realization of being cut off on the big day was sinking in fast.
Having no non internet radio available in the house, the next move was to the car where, oddly, only a single radio station was on air. The announcer confirmed all of Key West was cut off from both internet and mobile service but had no information on the cause or expected restoration.
While I knew the conference would still go on without me, I hated the idea of so many people waiting for me and not even knowing that I was cut off from being able to inform anyone.
So began more than an hour searching around the island for an analog phone line – starting with a couple of businesses I had relationships with then scouring shopping and high foot traffic areas for a pay phone.
Have you noticed that pay phones are just about non existent these days?
As I was wrapping up that fruitless search, I actually found one that looked totally intact. As I rushed over to grab it, a deeply tanned and wrinkled older woman sitting a few feet away blew some smoke at me and said “Sonny, that phone hasn’t worked in 5 years now. Though it’s been gettin lots of attention this last hour!”
She followed up with “You know you’re in Key West now. We don’t worry about such things here.”
Search For Connectivity
So back to the car where I hear on the radio that the cause for disruption was a garbage truck hitting a utility pole on the island of Islamorada, 86 miles north of Key West.
With the announcer indicating telecom or internet service was not expected to be restored till 3pm, my next move was to start driving North up Highway One, figuring at some point I would pick up a cell signal.
It took about an hour and as soon as I got a signal was able to send out some texts to the UVC team and a couple of my missed meeting appointments.
I was able to get into the speaker’s green room and chatted with Brad Feld, but decided my signal strength was not stable enough to risk a disrupted session with me moderating.
Fortunately, our advance coordination the UVC team included a Plan B with UVC CEO Nasir Ali fully equipped to step in as an alternate moderator as we reviewed the interview script the day before.
Nasir did a great job and the session unfolded without any sign of my drama behind the scenes. A credit not to just his moderating, but also UVC COO Kathryn Cartini’s capable hands in orchestrating a seamless production effort.
By the time I returned back to Key West, internet service was restored and I was able to complete 5 of my scheduled one on one meetings. I truly missed not being able to converse with Brad at such a penultimate event for UVC. But overall, very pleased on how it worked out as a solid team effort and high impact virtual event for the UVC community.
And yes, that interaction at the pay phone did bring back that realization I was letting the urgency of the moment cause me to lose sight of our mantra here to be “Living on Key West Time”
When a city struggles to create jobs, citizens tend to turn to the government to fix the problem. Politicians then attempt to allocate tax dollars for economic development or pass laws and regulations with the intent of stimulating job growth. However, as voters and taxpayers, we have to be asking – how often do these initiatives work out?
Not as often as they should. While many, if not most, elected officials are well-intentioned and truly want to do what they can to help stimulate job growth, the traditional paths fail to create results promised when initial announcements are made.
When we look at past examples of government initiatives and break down the go-to methods of economic growth, it becomes clear that not only do these approaches fall short, but the government might be the wrong entity to stimulate the economy entirely.
The Problem with Government Initiatives
First, let’s look at the traditional path the government takes to stimulate job growth: tax-dollar allocation and building properties.
There’s a core problem we see on both of these paths: the common belief that it is possible to create new jobs from the top down. Politicians tend to see job growth as something predictable and under their control, so we often encounter what I’ll refer to as the Field of Dreams mentality, a nod to the 1989 baseball film starring Kevin Costner. Think, “If we build it—a factory, office building, etc.—the jobs will come.”
At an abstract level, this sounds completely logical. The problem is that it doesn’t work in reality. Couple the “build it and they will come” belief with the short-term focus politicians have in order to impress voters before the next election cycle, and you have a recipe for a lot of impressive-seeming actions without substantial results.
Politicians approach the problem from this angle because that’s what they’ve done for the last fifty years, and it fits the mold of top-down behaviors that look good in a press release. However, they’re trying to solve today’s problem with an old set of tools.
A History of Failed Projects
You don’t have to look far to find examples of failed government job creation projects. One notable instance in recent years was the New York State Film Hub based in Syracuse.
In 2014, Governor Andrew Cuomo announced with great fanfare that the $15 million in taxpayer funds being invested to construct a new facility would create more than 350 high-tech jobs by having a university-operated hub blend cutting edge nano-technology with film production. “Hollywood comes to Onondaga County,” Cuomo said.
Yet, three years after opening, the gleaming 52,000 square foot building sat virtually empty, having been used for a few short projects, and never coming close to living up to the Governor’s hype.
In 2018, after failing to secure commercial tenants or traction with film projects, the state transferred title to the facility to Onondaga County for $1, effectively writing off the $15 million taxpayer investment in the ill-conceived belief that the government can create businesses and jobs by funding construction of a building – much less the larger film industry subsidy issue which corporate subsidy experts roundly criticize. “Every state analysis I’ve ever seen finds that taxpayers get back only dimes on the dollar from film production tax credits,” says Greg LeRoy of the D.C.-based corporate subsidy watchdog Good Jobs First.
Not only did the film hub project fail to create jobs, but it also showed how the cozy relationships between politicians and property developers have the potential for corruption to creep in. In this case, the film hub developer was the governor’s largest campaign contributor at the time and also the sole firm to submit a bid on the $15 million project.
A More Effective Way to Create Jobs
Patterns of “build it and they will come” and tax-dollar spending are not unique to New York State. They are repeated all over the country with similar results.
Politicians allocate taxpayer dollars to build a building in a heartbeat, but that effort does nothing to actually create jobs beyond the construction phase, nor does it have any impact on accelerating the launch of new startup companies.
What does work?
Despite the poor record of tax-and-construction projects, politicians need not be the enemy when it comes to creating good jobs. When they take the long-term view and understand the needs of entrepreneurs, public officials can be strong allies.
Most of them got into politics because they truly care about helping people, and if entrepreneurs like you help them see a better path to serve the community, some will get on board in ways that support job-growth ambition.
Most importantly, with or without politicians’ help, job growth and change needs to come from the bottom-up, not from the top-down. Entrepreneurs understand far better than politicians what creates jobs. Therefore, we can use time and resources to most efficiently change our local economies.
For more insights on how to transform local economies toward job growth in newer industries, you can find More Good Jobs on Amazon.
Martin Babinec founded NYSE-listed TriNet, a Silicon Valley cloud-based HR service, where he served as CEO for the company’s first twenty years. Relocating to his hometown of Little Falls, New York, he founded nonprofit Upstate Venture Connect, StartFast Ventures, and UpVentures Capital, all of which help grow, support, and invest in transforming Upstate New York’s economy toward job growth in the newer industries. As an independent candidate for New York’s 22nd Congressional District in 2016, Babinec also founded the Upstate Jobs Party (UJP) to influence political discourse on better solutions to grow jobs and reverse regional population decline.
As a newbie author, I am finding lots of exposure opportunities to spread the message of More Good Jobs through the expanding medium of podcasting.
Each podcast interview I’ve been invited to has been interesting and generated great discussion. Enough so that now we’re working on putting show notes on the More Good Jobs press section with the aim of helping our community dive right into the particular themes they’re most interested in.
With today’s election being top of mind for everyone, I’ll highlight last week’s MergeLane podcast with host Elizabeth Kraus. She pressed me on certain issues as no interviewer had done, including on topics that set up an interesting dialog about how we as entrepreneurs, investors and community leaders can do more than just show up at the voting booth if we want to drive systemic change.
The total podcast is about an hour long. The first half hour or so sets up More Good Jobs themes profiled in the book, along with Elizabeth sharing perspective about her view of startup community from being based in Vail, Colorado.
All good stuff, including Elizabeth pushing back a bit on my assertion around the difficulty of attracting VCs to invest outside the Magnet Cities known for being tech hubs.
However, the last third of the interview is where we start diverging from standard MGJ interview themes.
Upstate Jobs Party – Independent body and PAC building voter and political engagement to increase Upstate NY’s talent retention and grow stronger communities
Unite America – Non profit leading advancements in political reform to drive structural changes in the electoral process
Right To Start – Non profit campaign to rebuild the American economy by unleashing entrepreneurial opportunity for everyone
Yes on 2 – ballot measure in Massachusetts for Ranked Choice Voting
Ballot Ready – Company that activates and empowers an informed and engaged electorate.
Many thanks to Elizabeth for an engaging interview that stimulated great discussion. I hope some of what we shared might stimulate more thinking around options we have to help bring about change we believe in, well after we leave the voting booth.
A long history exists of government funding that targets healthcare, environment, defense, or other societal needs. While it makes sense to allocate some public dollars toward research being conducted by colleges and companies, a grayer area creeps in when public funds go into commercializing a new technology or expanding production capacity, both of which become assets owned by a private company to grow their business.
The attractiveness from a political standpoint is clear: let the government write a check to a company as part of an economic development effort to create jobs. But who really wins with these initiatives?
More often than not, the private company wins, the government comes out looking like they’ve made an effort, or nobody wins at all. But despite the public footing the bill, citizens like us almost never see real benefits. In fact, what is meant to be a major job-creating effort turns out to be a waste of money.
The Government Can’t Pick Winners
The biggest problem with public money going to private companies is that it puts the government in the position of picking winners.
History has shown us the government’s track record for picking winners is horrible. A recent paper from Columbia Business School and Princeton claimed researchers found no evidence that tax incentives given to individual companies increased overall economic growth. Furthermore, the study found that almost a third of total state economic development incentive spending “went to .0072% of new firms and 1.41% of all jobs created by those firms.”
Professional investors with their own money at stake have a hard enough time predicting which companies will grow. Even the best professional startup investors in the world pick more losers than winners. To expect a government bureaucrat to be able to outperform these investors is ridiculous.
Publicly Funded Publicity Stunts
Putting politicians in charge of deciding which companies will be the beneficiaries of public support starts going down a slippery slope, with economic consequences that are rarely transparent. It opens the door for corruption, where instead of choosing the company best positioned to create jobs, politicians might give the benefits to a political donor or other special interest.
At best, the results are that these efforts underperform and fail to create the promised number of jobs. At worst, they’re little more than a publicity stunt for the politicians and companies involved.
When the government is in the position of choosing private beneficiaries without transparency, taxpayers aren’t shown the magnitude of tax dollars invested per job created or have awareness of any other alternatives that might grow more jobs. Instead, all attention is given to the ribbon cutting photo op with a collection of politicians vying for the opportunity to lay claim in saying, “Look at what I did for you.”
Often, it doesn’t matter to the politicians whether or not their initiative was successful, only that it reflects well on them. Suffice it to say, in this scenario, the public loses.
Even Successful Companies Can Fail to Deliver Results
You might think, politicians simply need to choose the right companies to support, but even successful corporations regularly fail to meet expectations.
For example, New York State under Governor Andrew Cuomo spent $750 million to build a solar panel factory to be used by Tesla, which had promised to create 5,000 high-paying, high-tech jobs upstate—3,000 of them in Buffalo. Yet the company has fallen short of its 2020 job creation goals. Worse, the state then lowered expectations from what was originally promised.
According to the Albany Business Review: “A Vanity Fair story in August found the state quietly changed the requirements Tesla must meet in exchange for its $1 lease on the Buffalo factory. The requirement for 1,460 “high-tech” jobs at the factory was watered down to jobs of any type. An agreement to hire 900 people at the factory within two years of construction ending in 2017 changed to 500. And the timing for creating additional jobs was extended to 10 years after the factory was completed.”
This example shows that even when relatively successful companies are involved, government efforts often fail to create meaningful jobs in the numbers needed to help our communities thrive.
It’s Time to Ditch the Top-Down Model
In the quest to create good jobs, public money going to private companies is not the answer. Tax incentives, government-built properties, and other benefits fail to produce results. These strategies have not proven their ability to create more good jobs at a cost that makes sense to taxpayers.
Instead, when we look at the places where true, organic creation of good jobs has happened, we see that it hasn’t been fueled by top-down policies or tax incentives. Good jobs come from the bottom-up, in which the best job generating communities embrace innovators and attract young, educated workers. Local entrepreneurs and community leaders in these talent magnet cities foster environments in which startups and innovative companies can thrive.
If more communities embrace a long term commitment to embrace these principles, we’ll have a chance to see tax dollars spent on more meaningful community investments – as opposed to the overhyped and underperforming ploy of putting our money into the coffers of private companies.
For more insights on how to transform local economies toward job growth in newer industries, you can find More Good Jobs on Amazon.
Martin Babinec founded NYSE-listed TriNet, a Silicon Valley cloud-based HR service, where he served as CEO for the company’s first twenty years. Relocating to his hometown of Little Falls, New York, he founded nonprofit Upstate Venture Connect, StartFast Ventures, and UpVentures Capital, all of which help grow, support, and invest in transforming Upstate New York’s economy toward job growth in the newer industries. As an independent candidate for New York’s 22nd Congressional District in 2016, Babinec also founded the Upstate Jobs Party (UJP) to influence political discourse on better solutions to grow jobs and reverse regional population decline.
Imagine walking into a startup meetup and asking the first founder you meet why private capital matters for startups. If they’re like most founders, they will look at you with a blank stare of silent confusion.
Asking a founder why capital matters is like asking a fish why water matters — it’s such an ubiquitous part of their ecosystem that they can’t even imagine a world without it. Startups need capital to get off the ground, and generally, the more innovative the company, the more capital they require.
It’s not hard to see that creating anything unproven in the market is more expensive than copying an existing business model, but what exactly makes startups so expensive?
More than anything, the time, talent, and problem solving that startups require to create or overtake a market makes outside capital a necessary part of the entrepreneurial process.
Problem Solving Costs Money
When you’re solving a problem that no other company has tackled, you’re probably starting from scratch. That means laying the groundwork for your solution, making mistakes, and refining every step of the way — all of which consumes time and money.
Whether the startup is creating a product, service, or technology, there is a lot of problem-solving and customer discovery required to iterate a solution that can scale up to large volume adoption beyond a local marketplace.
Sometimes with a narrow, technology-based innovation that is timed to ride a host of marketplace drivers (e.g., WhatsApp, Instagram, etc.), it is possible for this growth to scale up incredibly quickly. But these are the exceptions, not the norm, as most businesses will go through a series of iterations to tune both the product or service and the path to growing new customers.
Startups Must Educate Customers
Not only do startups need to problem solve, but they also must educate their customers on their innovative solutions. The challenge of educating customers to become early adopters is a big hurdle when you are asking them to stop doing something they are already familiar with.
People are naturally resistant to change, so there’s a burden of proof on the startup to show why the new solution is better in a way that the customer never heard of or thought about before.
Startups also have to convince customers that the risk they’re taking by trying an innovative product won’t backfire. For example, if you opened a hotel, people would instantly understand what you do. But as Airbnb found, even with their Silicon Valley start and backing of legendary startup investor Paul Graham, it proved to be a lengthy process of discovering the right mix of education paths and risk-mitigation mechanisms to drive adoption for allowing strangers to sleep in one’s own home.
For many innovative companies, earning their customers’ trust requires a significant investment of time and money.
Innovation Requires Expensive Talent
Lastly, startups in newer industries consume so much capital because they require expensive talent to solve their problems.
People who already have plenty of other opportunities and sufficient demand for their specialized skills can’t be hired on the cheap, and startups don’t need only one of these workers — they need a whole team.
It’s not realistic to assume that the innovation of a single founder will be enough to cover all the functions encompassed in building a true company that scales up to meaningful levels in headcount and revenue.
This team alone requires a large amount of capital to cover salaries while the startup is gaining momentum and building its revenue stream.
Capital Gives You a Competitive Advantage
With these factors in mind — the problem solving, education, and talent required to succeed — you can imagine how easy it is for an innovative company to consume capital. Most startups simply won’t have sufficient revenue growth soon enough to power through the long product and customer development cycle, so they need significant external capital to get off the ground.
The good news is that in today’s market, you can get a startup up and running faster than ever before. By taking advantage of cloud-based services such as Amazon Web Services or Microsoft Azure, plus prebuilt shopping carts and other online transaction tools, you can build a professional website and start selling your product or service in a single afternoon.
The downside to this is that there’s also more competition than ever before. That’s why one truth about startups will likely never change: capital gives you a competitive advantage.
More money means more talented people creating your solution, more marketing, and more customer education, all of which give your startup the best chance of success.
For more insights on transforming local economies toward job growth in newer industries, you can find More Good Jobs on Amazon. Visit our More Good Jobs Community site to share knowledge and connect with builders and supporters of innovation economies everywhere.
2020 has been a year of surprises and adjustments for everyone on the planet.
Since March, I’ve been blessed with staying healthy and surrounded by our entire family. But challenges across each of my company and non-profit organizations put me back into a more urgent work mode than I’ve been at any time since stepping down as TriNet’s CEO 12 years ago.
While my recent posts targeted entrepreneurs and company leaders navigating Covid challenges using Wartime Leadership, I’ve been putting lots of energy towards finishing off More Good Jobs – a project in the works for almost three years.
What started in 2010 with a goal of helping nudge a new direction for the Upstate NY regional economy, has gradually (and sometimes painstakingly) evolved towards building and connecting local tribes to embrace cultural elements more commonly found powering metro areas with an abundance of emerging tech company startups.
More Good Jobs is both the story behind that journey and a playbook I hope will help leaders look to for a menu of options to consider if they are ready to join or jumpstart change in their own community.
With the book launching October 20th, much of my writing for the rest of the year will be devoted to themes coming out of More Good Jobs. I’ve set upMoreGoodJobs.org to house dedicated content and also build a MGJ Community for people wanting to engage with others interested in developing entrepreneurial ecosystem.
What follows is an excerpt from my introduction in the book. That introduction continues on theMoreGoodJobs.org site – so if the story is of interest, I’ll hope you click on over there to check it out and perhaps request a free chapter as well as add any comments and share with your friends.
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I am the product of two valleys.
I was born and raised in Upstate New York’s Mohawk Valley. As many in my area do, after college I left to pursue my dreams elsewhere. Unlike many others, I ended up boomeranging back home twenty-five years later.
The Mohawk Valley is placed within a larger region that is an undisputed talent factory, attracting students globally to attend our world-renowned colleges and universities. The Commission of Independent Colleges and Universities reports that New York has more students traveling in from other areas to attend college than any other state. As a whole, the one-hundred-plus Upstate NY colleges enroll almost a half-million students, including tens of thousands of STEM students, making it one of the largest STEM cohorts of any geographic region in the country.
There’s a flip side: we wave goodbye to far too many of our next generation leaving Upstate New York after graduating college as they search for better opportunities elsewhere.
Silicon Valley is my other world, the place where I landed in the late 1980s due to my job transfer. I arrived with no advance plan or relationships, and after two years of a frustrating search for a new job, I decided to leave my setting of secure employment to start what I hoped would become a successful small business in the then-unheard-of category of human resource outsourcing.
What followed was a roller-coaster story of Silicon Valley challenge and opportunity. A ride that I am still on today as a board member of my company, TriNet, a New York Stock Exchange–traded company with annual revenues of about $4 billion.
In the twenty years I served as TriNet’s founding CEO, our principal target market was emerging technology companies and supporting ecosystem players who invested in or served these high-growth organizations. Since TriNet provides the full range of human capital management to help these firms grow, I had an insider’s view into how innovation economy companies get started and grow, initially in Silicon Valley and, over time, in all the major tech innovation hubs in the United States.
I first began to pay attention to the contrast between my two valleys as my wife and I traveled back home with our children to visit our extended families. Over a decade of these trips, our priorities evolved around the setting we felt would be best for raising our three children. It was during the summer of 1999—while TriNet was on the cusp of seeking an initial public offering (IPO) at the very height of the dot-com boom—that we made the life-altering decision to relocate back to my hometown of Little Falls, New York.
The plan was for me to cross-country commute for eighteen to twenty-four months before passing the CEO baton to another person. But the dot-com collapse thwarted that scenario. TriNet’s planned IPO was aborted post roadshow on pricing day, in October 2000, and my commute ground on for a full ten years as we rebuilt the company following a painful series of layoffs.
Living a bicoastal existence with long commute times (and no direct flights from Upstate to the West Coast!) spurred lots of reflection on the contrasts between my two valleys. It was over this decade, commuting between these two worlds, that I observed the stark reality of the similarities and differences between them.
Both regions produced incredible numbers of talented young people. And yet Silicon Valley was thriving with a magnetic pull for retaining and attracting these young people from elsewhere, while my Mohawk Valley seemed to be moving backward by exporting them.
Logging more than a million miles in cross-country flights during this period prompted lots of reflection on why this gap was so vast, even when discounted for obvious differences of population density and current industry clusters. The business community across Upstate New York seemed to be rallying against the high taxes and unfriendly business regulations, claiming that smaller government would fix our problems. But as I looked around the country, this didn’t feel right. California certainly wasn’t known for its business-friendly regulation or low taxes. Neither was Boston or New York City. It seemed there needed to be a better reason for this divide I was experiencing.
I thought back to my own experience. What if I had decided to start TriNet while living someplace other than the San Francisco Bay Area? How would it have turned out? Did we owe some portion of our company’s success to the unique environment that Silicon Valley had to offer.
Click Here to continue the Introduction story on MoreGoodJobs.org
Many companies savaged by loss of sales due to Covid-19 have already been through a first round of layoffs. Even with talk of easing stay at home restrictions, the revenue outlook for many businesses is looking bleaker now as companies are still grappling with prospects of a long recovery.
If you’re readying another round of headcount reduction, it’s important to go as deep as you possibly can to keep the business afloat with defined revenue and available cash. The preparatory steps were outlined in my previous posts Survival Assumptions and Picking the Wartime Team.
We’ll presume you’ve thought through whether to furlough staff (which may keep employees on benefits for those most likely to return) versus outright layoffs (for those less likely to return in the immediate future). Both sets of employees would be eligible for state and federal unemployment benefits, including additional benefits provided by the Federal CARES act. Lots of guidance is available on those topics. Here is one example for New York State employers.
This post is about the human interactions on layoff day. All team members, departing and retained, deserve your respect and sensitivity. The right approach involves coordinated steps for consistent company wide execution. I’m drawing from experience in having been through this painful process too many times in TriNet’s struggle to overcome the dot com blow up.
All Hands Announcement
A morning company “All Hands” meeting is the best avenue to answer the most important question and ensure it is communicated consistently – why are we doing this?
Even though everyone knows that Covid-19 is affecting the business, the extent to which that has affected your revenue line is probably not well understood throughout the ranks. If you haven’t previously shared financial information company wide, then the connection between revenue and what’s available to pay for salaries may also be a big unknown for those not directly involved in the budgeting process.
The All Hands should provide staff with an objective grounding in financial and operating metrics that stresses how significant the difference is from the pre-pandemic world to the currently uncertain future. It’s important that the full team be aware of the non-people-related costs you’ve already stripped out. Ideally, the contrast between the pre-pandemic and the wartime plan ties to elements of your Survival Assumptions. These critical items have to be clear so everyone understands the need for dire action and the layoffs occurring that day.
Following the facts outlining the need for drastic change, you can describe the process by which people will be informed and highlight steps the company is taking to help those being released.
Close with your personal, most sincere thoughts about what taking these reductions mean to you. There’s no perfect script. Your openness, accountability and vulnerability will impact how people remember your leadership at this most critical time.
1:1 Discussions with released team members
Rule one about informing people being released is never deliver the first news by letter, email, text, slack or voicemail. Since the pandemic precludes in-person meetings, videoconferencing is the best option, with a direct phone call the only alternative. Anything less smacks of callousness. Departing team members will never forget their separation experience and will likely share with others how the company treats those it let go.
Ideally, these are one on one discussions led by an upline manager or executive, not a job for HR or someone not involved in managing the team member being released. In larger companies with entire departments being shut down, it is possible a group meeting with several people on the same session may be necessary. In situations where the manager or executive is also being released, the notification responsibility rolls up to the next level – all the way up to the CEO.
While you might plan on a layoff notification taking 10 minutes, most will require 5 minutes or less. Even though the earlier All Hands meeting set the stage, if you’re the team member receiving official notice your income is being cut off, it’s simply not a discussion most people have a desire to prolong.
Neither managers nor the team members want to be in these meetings. Some will seek to avoid them. It’s up to the CEO to drive the requirement for personal interactions and ensure managers are provided an appropriate HR approved script that is followed consistently throughout the company.
This includes providing written documentation on the details for timing and offboarding process, impact on the employee’s benefits and guidance on filing for unemployment benefits. Doing so allows the procedural part to be mentioned and passed along in writing, and offering the opportunity to answer questions. HR may also have a list of Frequently Asked Questions that managers can refer to.
After the formalities are done, comes the important topic of what the manager can do to assist the team member being released. Managers can deliver great value to a released team member in a number of ways. For instance, writing a recommendation that appears on the employee’s LinkedIn profile and showing readiness to support job search efforts are basic steps. Going into details at this stage is not the point, as most terminated employees won’t remember them. What the employee will remember is how sincere and compassionate you were in being sensitive to their situation. A personal follow up the next week to show your support will be a better time to talk about specific ways that you can help them.
Recapping With Survivors
By the end of the layoff day, all the survivors will be emotionally exhausted. A close of day All Hands meeting for those who remain is your first opportunity to address the survivors’ grieving process as well as set the tone for what’s ahead.
Recognize that while survivors are grappling with a sense of relief as well as regret and sadness over the loss of colleagues, some of which may have been close friends. They may also be concerned about losing key contributors whose work will now be distributed among a smaller team.
This meeting is the CEO’s opportunity to lay out key elements of the wartime strategy to answer top of mind questions like “How are we going to survive this? What are we going to do differently?”
Possible topics might include:
Department and role consolidations (described in Picking the Wartime Team) and what will be necessary to put these changes in play while minimizing disruption to customers.
What new revenue opportunities will you be evaluating? Are there some new service opportunities appropriate for the pandemic environment that are suddenly in demand?
Back burner pet projects that had longer term implications – explaining the lens used to consider resource allocations beyond fulfilling immediate customer or near-term revenue.
Looking at shifting some fixed compensation to variable, as well as hours reduction and a re-examining of paid time off policy.
Closing with a very clear set of wartime priorities and a reminder that everyone has the opportunity to contribute. This is a great time to roll out changes that enable sharing across department lines and push ideas and opportunities upwards.
Leave time for Q&A and in these remote situations, define your process for Q&A to be accomplished virtually. There are some questions that are best addressed individually, while others require the CEO speaking to all in attendance. A chat moderator may be helpful in deciding which questions are suited for a group response.
When you get to Q&A, it’s guaranteed to include the most top of mind issue for all: “Will there be any more layoffs?”
Steer clear of making promises you may not be able to deliver on. It’s your customers buying that drives revenue and the prolonged period of uncertainty will have implications you simply can’t predict.
Like other rookie CEOs facing their first massively secular downturn, I fell into the trap of feeling like my making a commitment that we’ve put the pain behind us would instill confidence in survivors. But as TriNet’s revenue slump continued to deepen, it became obvious our cuts were not deep enough. In retrospect, my answer only created further questions about my leadership because I had set expectations I could not deliver on.
Having to go through layoff agony multiple times is my deepest regret as CEO. Especially with regards to how I set expectations about our recovery. In response to the “Will we have any more layoffs?” I should have responded truthfully along the lines of: “I can’t make promises about the pace our customers are going to resume buying. We’ve cut really deep so we don’t have to do this again. It’s a coordinated effort that needs buy-in from every single person here. That’s the only way we get out of this with the very talent we have on board today.”
My friend Jeff Hyman is a superstar recruiter, Silicon Valley serial entrepreneur and former TriNet client. He went through his own dot bomb experience and has a terrific video capturing elements of Wartime Leadership. Scroll ahead to 58 minutes for a quick look at survival assumptions followed by guidance on your D-Day meeting with survivors.
When bullets are flying, who do you really want with you in the foxhole?
My prior Survival Assumptions post described the process for doing bottoms-up revenue and cash forecasts. Armed with these, you now know how much cost needs to be cut out for the company to survive an extended war of attrition.
Let’s also presume you’ve cut (or have a list of) the obvious non-people expenses. What’s left now are the hard decisions around which people will be asked to leave and possible salary reductions for those that remain.
Identify Essential Functions and Consolidate Roles
Identifying the bare minimum resources needed to sustain existing revenue becomes the starting point. Start with narrowing the essential functions that have to be covered – including looking at options to change how your organization is structured. Can some of those functions previously segmented into different roles and departments be consolidated?
The steeper your revenue shortfall is compared to the pre-pandemic budget, the more department and role consolidations come into play. Look at which units touching customers are organized under different managers. Consider putting these functions together and reallocating how the work is distributed across a smaller team. In addition to reducing overall costs, this type of action can deliver more efficient execution with a leaner management stack.
One word of caution is to beware of managers seeking to preserve their own jobs and suggesting drastic changes for other groups.
Synthesize Multiple Inputs
The actions recommended in my previous post have already got you prodding people at different levels. In both group and individual meetings, you’ve been asking for creative input that departs from the current process and structure while still preserving essential functions. The objective is always so your company can maintain (or grow) revenues with fewer people.
Now it’s time to curate that input and start modeling different scenarios. Initial modeling prepped by the CFO for discussion with the CEO, might also loop in potentially 1-2 other direct reports who aren’t in the zone of consideration for their own roles being on the chopping block. Intense discussions around unit and role consolidation (including potential management reductions), should take place in a very tight group before expanding to a broader management team review.
Start with the highest management tier – can you consolidate departments like Sales and Marketing? Or combine Sales and Customer Delivery/Account Management to a Chief Revenue Officer? Which admin and general expense departments can be consolidated to a leaner team?
As you advance to a broader team discussion, your thoughts on which of your direct reports may be cut won’t be shared right away as you want consolidation discussion to go deeply across all company lines before finalizing on structural changes driven by the reduction.
Start looking at the individual people affected only after getting a clearer picture of the new structure that is needed. Some team members are likely better suited to work in peacetime where roles and processes are more clearly defined and there is less emphasis on fast, creative problem solving and flexibility. In wartime, you want people who are committed to fight hard battles with few resources and are also nimble enough to rapidly adapt to new roles/wear multiple hats.
Balance Objective Measures with Core Values
In the first round of headcount cuts, it’s often easy to separate top performers from those that are below par. But if your revenue loss pushes you towards massive cost reductions, you’ll have to lay off committed performers who’ve done all that the company has asked them to do. Making these choices is the hardest of hard things.
You’ll have your own bias about people you’re already interacting with on a regular basis. However, the larger your company, the harder it is for you as CEO to have in-depth personal contacts across the organization.
At the start of the “dot-bomb”, TriNet had about 500 employees spread across diverse functions in eight different metro areas. Going through the process described here, we were fortunate to have already incorporated a set of 5 core values into how we arrived at other HR decisions like hiring, firing, promotions, equity grants etc. Faced with the decision of selecting people to go into the new leaner structure, our internal discussions were grounded on core value attributes demonstrated by the people retained vs. those to be released in a layoff.
Within the context of our core values, we looked hard at objective measures for productivity, contribution to cross functional teams and projects, evidence of exceptional customer satisfaction, speed at which someone learned new roles and other attributes that lined up with important qualities we needed during wartime.
So while the final decisions were a blend of applying objective measures and subjective judgement, the takeaway here is that having a defined process around how these decisions would be guided helped get the right information into the mix and also minimize impact from the loudest voices in the room (aka Strong Opinions Loosely Held).
Cutting salaries is another tool in the box as part of an overall cost reduction strategy. Most companies don’t consider it as there are many complications to work through, including contractual and culturally.
You want survivors committed to stay, not putting valued energy into pursuing opportunities elsewhere. So this approach is best considered only if there is genuine solidarity among the workforce that belief in the company, and their fellow team members, is strong enough that people express a preference to lowering their own salaries as an additional way to keep more team members on board.
At TriNet, we chose to take a voluntary approach offering incentive stock option grants with meaningful upside opportunity for participants. We did not release program details until we first socialized it through the executive team and other key contributors to confirm there was a broad base of support for people to take advantage of it. It also made a difference that we had an ongoing effort at upgrading the entire team’s financial literacy so they had some background on how to view the company’s progress and also how stock options work – both critical elements to get buy in for trading salary cuts for equity upside.
The Leader’s Accountability
Wartime is the ultimate test of a Founder/CEOs leadership. My inner conflict of wanting to protect the livelihoods of those who passionately supported the company was the greatest struggle I ever faced as an entrepreneur.
We can’t delegate these hard decisions to others. Even with managers making recommendations at each step of the process, I took ownership for every layoff decision made. These were people who trusted me in guiding the company in a way that assured a continuing opportunity for them if they met and exceeded standards we said defined both successful performance and embracing our core values.
I felt personally responsible for the management failure in not being able to hold up the company’s ability to fulfill that agreement. The weight of those layoff decisions affecting hundreds of people’s lives stays with me still 20 years later.
While I can’t turn the clock back to redo my decisions that led to scaling up so fast at the tail end of the dot com era, I do have some comfort in knowing that our process of selecting the wartime team had a lot to do with our surviving the long nuclear winter that destroyed most other businesses so dependent on tech company customers as TriNet was when the dot com world blew up.
Next post in this series will cover the human interactions on layoff day – both those being laid off and the survivors.
How do we navigate through a period where we know our revenues are going down, but we don’t know yet by how much, or for how long? No one can predict when business will return to the pre-pandemic state. We know we have to cut expenses, but what’s the right reduction target to be aiming for?
As discussed in our Wartime Leadership series opener, we all lack clarity for answering these big questions. This uncertainty in turn drives hard decisions around how deep to take cost reductions – especially when it comes to laying off team members.
By now, many companies have already taken their first round of cost cutting yet remain more than a little uncertain if they’ve gone deep enough.
This post offers a methodical approach to defining a basis for forecasting the 2 most critical items on a CEO’s list: revenue and cash. The basis behind what gives visibility to revenue and cash drives how deep our cost cutting measures have to be to stay alive – or put another way, our survival assumptions.
We’ll start with the revenue forecast since that factors into cash flow planning and is also the harder to define through this fog of war. We’ll also presume you’re a B2B company not expecting a quick rebound once stay at home orders are lifted since the pace of restoring revenue depends on a combination of factors you have little control over.
With so much diversity across industries, business models, company profile etc., it’s not feasible to suggest a universal model that works for everyone. I’ll instead highlight a few process steps that may help steer your forecast towards being realistic and sufficiently fluid so you can guide decisions as circumstances change.
Throw out the peacetime budgeting process
If you’re running an established business with a history of operating and sales team metrics, you’ve already got a defined process to approach budgeting. In peacetime, this is typically a CFO led exercise beginning with past baseline and trends passed to each operating exec. Execs and their departments add updates without necessarily having company wide guidance on macro trends or big picture external forces to consider.
Since how and when businesses recover from the pandemic will be all over the map (including impact on your customers reeling from pandemic losses themselves), the wartime approach has to take in a lot of non traditional input, gathered in a consistent manner so the findings can be rolled up and examined holistically, as opposed to each department viewed within its own silo.
Get outside the building to gather new data
Gauging the extent of unknown external forces is what makes for the wartime exercise here. Relying only on what you know from inside the company would be like guessing how many troops you’re dispatching to battle before assessing the size and positioning of your enemy.
Wartime CEO and serial entrepreneur extraordinaire Steve Blank says “There are no facts inside the building so get the heck outside.” This means dividing the team up with specific missions to go out and grab external findings from customers and prospects. When synthesized, these findings paint a more complete picture of the forces shaping the uncertain world your company is interacting with.
Sample discussion points might include:
How are different customers and prospects affected by Covid-19?
Which geographies and/or industry segments are they most worried about?
Are they reducing staff?
Do they need to modify their buying plans with you now?
What changes can you make to help them?
Which trigger points or trends is the customer watching as leading indicators for where their revenue is headed?
With pandemic restrictions precluding in person visits, you won’t get a grasp of what’s happening with your customers by sending out email surveys or expecting them to give you online feedback. In wartime it’s the human contact that matters, now more than ever. Not only to get a response, but also to coax a bit more information out than they would not likely provide other than through one on one real time contact. If they don’t answer your calls and personal outreach, then that itself is a signal worth tracking.
Orchestrating a tight script with relevant questions is a large, manual task involving a broader portion of your team. A good script that you can deliver increases the number of data points and gives you a better handle on trends and findings.
Making sure everyone gathers input off a similar script increases value. This includes front line account managers, sales team members, and other managers and executives working in a coordinated fashion. Consistency of information capture is also important. This could be a scoring system in which account revenue projections are qualified with relevant comments (+ and -) that are also shared in a group exec team discussion as part of the roll up process leading to a consolidated forecast decided by the CEO and CFO.
Throughout the customer outreach at all levels, keep pressing for ideas that point to key leading indicators signaling strength of the account’s expected revenue. If you’re able to spot assumptions behind individual account forecasts, a pattern may emerge that can be distilled to a few core measurements for your revised overall company revenue forecast. These measurements will help in articulating the company plan to your board or possibly alternative financing sources. And they will now be supported with quantified assumptions which can be tracked over the coming months so you can update the forecast as the recovery unfolds.
Let the cash forecast drive cost reduction planning
At the same time you and outward facing team members are speaking with customers and prospects, the finance team can be pedaling hard on collecting payments already due, tightening up credit policies that might lead to reducing or eliminate credit, building cash reserves by drawing on available lines of credit and mapping out other debt options in addition to grinding through the process to file for the government sponsored Paycheck Protection Program and Disaster Recovery Loans you might qualify for.
Focused discussions should also be underway to identify an expanded range of cost cutting options. Following the kick off exec team session to generate an initial list of options, individual execs meet for a detailed drill down with the CEO and CFO. These interactions are less about making decisions on the spot as it is to spark and nurture ideas, and also note who is contributing in ways that look beyond protecting their own turf in suggesting creative options that make sense for the entire company.
While some of the obvious cost cutting might be implemented immediately, finalizing layoffs are best deferred till after you’ve got all the information put together from the updated revenue and cash flow forecasts. It’s only then that you arrive at the stage of showing the projected cash burn compared to your previous budget so you can then hone in on the amount of cost reductions needed.
Layoffs are the most drastic measures and should be undertaken after a great deal of thought. That being said, once the decision is made, it is best to act quickly and do in one single shot rather than creating waves of layoffs. Dribbling out layoffs over time is a sure fire way to damage your leadership credibility, destroy morale/impede productivity and increase the outflow of the very people you want to retain.
Active leadership matters
Wartime leaders are visible and hands on throughout all these steps. Everyone in the company is looking upwards to see how involved the CEO is. This is not a time to isolate and speak only with investors and executives. Team members are already aware the virus has severely disrupted the business, so there is a heightened sensitivity about whether their own job is in jeopardy. This is the time to step up interactions at all levels by taking part in team meetings and selectively engaging in 1:1 follow up discussions after the group meetings.
Asking questions and getting input from the front line team demonstrates through your actions that both assessment and decisions are being approached methodically. Your personal interactions will also prompt chatter through the ranks – which in turn spurs greater cooperation in driving the information flow upward so you can build the right set of survival assumptions that become your instruments for guiding key decisions through the uncertain times ahead.
Next post in this series goes into the hard decisions around positions, people and process for affecting a layoff.
This past week I reconnected with CEOs in ourUpVentures portfolio and others running companies that I have close relationships with. Synthesizing those conversations with other signals I’m getting about the economic impact of an extended shutdown, this post will advocate throwing out elements from leadership approaches companies were following just a couple months ago and rapidly shift to a wartime footing.
Let’s start with some necessary context before advancing to leadership approaches for these unprecedented times.
We lack clarity on timing of downturn and recovery
We know the scope of Covid-19 shutdown is like no other business challenge any of us have faced before. Post 9/11 had some parallels, particularly for companies in NY metro – but did not lock down entire industries and consumers for an extended period as is happening right now.
My own context coming closest was managing through the 2000-2002 dot bomb era – best appreciated by those who were in leadership roles in Silicon Valley over 1997-2000. Back then, we rode the dot com wave to frothy excess, only to see it all blow up in a nuclear winter that followed starting mid year 2000.
About 98% of TriNet’s revenue was coming from dot com customers – a great story when we sought to go public with our first filing on March 2, 2000. As mentioned in my 2014Pre-IPO Anxiety post, things didn’t work out then as planned and I had to dig into wartime leadership mode for the next two years.
Like now, we started the dot bomb era thinking it was a temporary aberration. Up to that point, dot com fueled an unprecedented wave of success and it’s natural to have confidence the past will soon return so could get back on track. With TriNet’s revenue model based on the volume of employees we serviced at other companies, customers closing shop or laying off people due to losing their own funding were immediate hits to our revenue. In a wartime environment, no one wanted to talk to us about buying our services – who had the time? We knew it would turn around at some point, but when would customers stop laying off and when would others be ready to start buying again? No one was predicting it would take the better part of 2 years to recover from that nuclear blast.
Like now, leaders were understandably concerned about trying to retain their talent and think that by showing optimism with the “we’ll get through this” outlook we can keep everyone working hard, and in sync, just like before. Albeit now we have the additional complication of not being able to call people together to meet in person.
Like now, since we weren’t clear on the duration of the downturn, we felt the urge to provide assurances to our team by making promises we weren’t sure we could deliver on.
And probably most importantly, like now, we as leaders were trying to avoid making the hardest decision of all – laying off team members to rightsize the business so that we could ride out what we knew would be harder times ahead than many of our team understood or were anticipating. Not just employees who were marginal performers, but cutting right to the bone by laying off talented people who had worked their butts off and done everything and more than we asked them to do.
In short, whether your business is fortunate enough to be in the category of being fueled by the pandemic, or the more likely scenario of being savaged by it, our entire mentality of leadership has to change from peacetime to wartime.
Peacetime priorities no longer matter
In peacetime we tend to put culture first, building the strongest consensus possible to get buy-in on decisions and are also deliberate in pointing resources and projects that support our medium to long range strategy. Most of that becomes irrelevant in wartime.
It’s no accident our military operates on a strict command and control model. Survival is the lens by which all decisions are examined through. Leaders micromanage the critical things that matter – for companies that begins with cash and collections since that’s the oxygen that keeps the company alive.
Start the process now with heightened focus on cash management with ultra conservative assumptions for a longer period than just a few months. Getting in line for the government’s PPP and disaster recovery loans will be short term band-aids, but necessary steps to invest management time in today since we know there will be a lag time to get that relief.
All bets are off if we thought another round of funding was on the horizon from equity investors. Living on our own cash with whatever debt sources we can raise is the new imperative.
We’ll also re-examine our assumptions about what we need on a wartime team. Not just our direct reports, but at all levels of the company. Can we combine some roles with one person now wearing 2 or 3 hats instead of the peacetime practice of separate departments?
Since we have to move fast, we know we’re going to have to make some decisions with imperfect information that do have some risks in the outcome. Sometimes that means we’ll break glass and ask for forgiveness later.
There’s only one goal in wartime
I’ll close with a couple quotes from Brad Feld’s excellent postWartime CEO:
Peacetime CEO sets big, hairy audacious goals. Wartime CEO is too busy fighting the enemy to read management books written by consultants who have never managed a fruit stand. – Ben Horowitz
Your big hairy audacious goal in wartime is not to die – Brad Feld
The next post in this series will touch on the hardest of hard things – approaches to laying off team members.
In speaking with company leaders, this is one of the first questions that come up.
What follows is how I’m responding when asked – but with the caveat that this is my personal interpretation of regulations in place as of March 23rd and isn’t official guidance from either Upstate Venture Connect or any governmental agency.
Follow links I’ve included in this post to see source documents yourself. And let’s keep dialogue flowing to share our collective insights to help each other mobilize and connect resources – including through UVC’s UNYCEOs email group referenced in our Upstate CEO COVID-19 Pledge.
Restrictions are intended to protect your workforce
Since restrictions are intended to protect your workers (including volunteers for non profits), any organization who can have their employees work from home should be allowed, and in fact encouraged, to do so.
The question becomes what happens if a portion of your workforce have roles that are performed either in a company facility or some other location.
No matter where the location is beyond the home, New York Governor Andrew Cuomo’s Executive Order 202.6 requires that each for-profit, non-profit, or government employer shall reduce their in person workforce at company facilities and locations by 100% from pre-state of emergency declaration employment levels – effectively closing the doors to your work locations unless the employer falls into one of these two exception categories:
Employers who are operating within one of NY State’s designated categories of “Essential Services”
Employers who are not in a specifically enumerated category of Essential Services but apply for and are approved by Empire State Development (ESD) for designation as an Essential Business.
NY State Designated Categories of Essential Services
The Executive Order presently defines 12 different categories of Essential Services including health care operations, essential infrastructure and selected manufacturing, retail, financial services, transportation, logistics and other services needed to respond to the COVID-19 crisis or sustain basic life functions in a community..
Keep in mind that the text of Executive Order 202.6 reflects what was approved on the issue date. Government response to COVID-19 seems to move almost hourly and new orders are being given to clarify missed gaps in the original guidance. So bookmark these links and check back as you’re firming up decisions to see the updated guidance.
This link to the Executive Order’s FAQ is also very useful in deciding if your business can fall into one of the enumerated categories – including what to do if one portion of your business provides essential service and another portion does not.
What if my business isn’t defined on the official NY State authorized list of Essential Services but I believe our company is providing an essential service that falls within the intent of the Executive Order?
If you’re not already on the enumerated list mentioned above, it’s necessary to fill out this online form to apply for your business to be approved by Empire State Development as an Essential Business. At present, I’m thinking ESD is being flooded with a lot more applications than they are equipped to handle with a fast decision.
Since government is most interested in fast tracking those businesses that have a compelling argument on how their company is providing a product or service fulfilling an emergency response need to fighting COVID-19 or sustain basic life functions, you might consider retaining a copy of your ESD application and asking your mayor, state assemblyman or senator, or regional ESD representative to assist in advocating your application for expedited review.
And if your argument is clear enough to fall within the existing exceptions outlined in the ESD guidance then there may be no need to apply. ESD guidance concludes with the following statement:
“Requests by businesses to be designated an essential function as described above, should only be made if they are NOT covered by the guidance.”
My successor CEO Burton Goldfield emailed our full board Wednesday morning marking March 27 as TriNet’s 5th anniversary as a public company.
This prompted me to relive some moments with Krista from that special day, along with reflecting on the business and personal sides of how the public company stage of TriNet’s journey continues to evolve my outlook today.
There are only about 4000 public companies meeting the listing requirements to trade on NASDAQ and NYSE. Since that number has been roughly flat notwithstanding about 900 IPOs over the last five years, it speaks to the tremendous difficulty in remaining an independent public company even after clearing the high hurdle to just IPO.
Being accountable to a budget, holding executives to the same accountability as the overall company and driving transparency throughout the organization are absolutely critical for public companies to survive intense scrutiny that comes with everyone viewing daily fluctuations in your share price. Missing targets investors are expecting you to achieve comes with immediate and hard hitting consequences rolling right up to the CEO, management team and board.
But now with a five year look back, I would add a couple nuances that are more subtle:
1. Accountability/transparency + High Volume Growth = Operating Complexity. Today’s IPO and public company requirements already have a huge complexity price tag just with to comply with Sarbanes Oxley, auditable internal controls, mandatory quarterly filings and managing institutional shareholder relationships to name just a few.
But since public investors demand steady growth well beyond an already large scale just to IPO, it is execution of the growth agenda now coupled with consumptive public company requirements that dramatically increase complexity of operating the business in a way that as a private company we couldn’t fully appreciate.
2. Ever growing operating complexity drives new leadership demands. Ten years ago I might have said that if we had several changes in key members of the executive team perhaps we weren’t making the right hire or promotion decisions.
Now my view has changed to say that with the operating complexity that comes from being a growing public company, dealing with inevitable disruption that comes with executive transition can be a necessary price for having the right people in the right seats who are in sync with the higher public company bar for a more advanced growth stage.
This five year look back also helps me grasp how difficult I would have struggled in navigating those same business challenges at this growth stage. It is with respect and admiration that I can look to Burton’s guiding TriNet’s success while staying true to the company’s mission and core values.
Continuing as a member of the Board helps me grow personally. Among other things, many of the public company lessons are an important part of the lens I use in interacting with earlier stage entrepreneurs that I might mentor or invest in.
The financial implications of TriNet’s continuing growth put my family’s independence on a trajectory I certainly never imagined when we started the company 30 years ago.
And after 20 years of explaining what TriNet does to almost every business person I met, it’s equally gratifying to see how strong our brand has become throughout the U.S. along with awareness that what we do affects quality of work life that has touched (my estimate) of a million or more people since we first began.
I am more than a little lucky to have had the help of so many terrific people who’ve contributed to TriNet’s success. How others supported me has in turn been a motivator in making decisions now on how I allocate resources and time helping others achieve their potential, particularly entrepreneurs who create jobs that foster fulfilling lives in their own communities.
Building scalable and lasting impact through investing, philanthropy and non-profits I help launch are opportunities I aim to be pursuing for as long as I am able.
For now, I’m one of many that can bask in the glow of what these first five years as a public company has achieved. I’m optimistic about the unknown challenges and opportunities still around the corner as the reward continues to be in the journey itself.
When a startup arrives at a stage of product market fit to show steady increases in revenue, my evaluation as an investor expands to include looking for evidence that the leaders are actively engaged in working ON the business itself as the team builds towards scaling up.
Experience helps pick up pattern recognition across a variety of decisions like how to hire winners, manage cash and keep the team on a focused path by everyone working on the right stuff.
But what about first time entrepreneurs, particularly those without prior experience in managing teams?
Founder vision and passion may be there, as well as the persistence needed to stay the course through tough times, but if the business is to scale up – that also means the entrepreneur CEO has to quickly adapt to challenges that each new phase of company growth brings. For rookie CEOs that invariably means navigating through situations he or she has never seen before.
Work Myself Out of A Job
As an active startup investor, I didn’t think enough about this before now. In part due to not having put enough emphasis on how a decade of management experience before starting TriNet was a foundation for my own entrepreneurial journey.
At the outset, perspective about not being the bottleneck for decisions others on the team could make was already part of my mindset. I had seen what worked and didn’t in my prior efforts to empower others so I was tuned to the value of working myself out of a job.
Founders with the startup being their first managerial role are having to learn these basics on the fly, while also carrying the burden of startup pressures on their shoulders as they navigate through unchartered territory every day.
It’s easy to be totally consumed with top of mind priorities like finding new customers and serving existing ones, supporting team members to keep them productive and expanding the team to fill growing demand.
Those and other day to day activities involving immediate people and resource allocation decisions get in the way of putting time into things like refining strategic direction of the company, driving changes in the company’s internal business processes, culture and public identity, finding investment capital as well as developing their own leadership skills for the next stage of company growth.
Working ON the business
Micheal Gerber’s classic “The E-Myth” popularized the notion that if you looked at any truly successful entrepreneur with an enduring company you’ll find someone who committed significant energy to improving the business itself at the same time they were also navigating through significant revenue growth.
Anyone growing a company from scratch knows how consuming the revenue growth and service side can be – so how does one find the time needed to guide improving the business itself?
Scaling up Requires a Capable Management Team
Organizations are only as strong as their weakest links near the top. A high performing team is one that leads together with unifying purpose and consistency in living a company’s core values as everyone puts the overall company ahead of any single individual or department.
But if the early stage team is also new to managing others, as the volume of necessary decisions grow (resource allocation, who to hire, changes to internal processes etc.), decisions which might routinely be made by a manager in a slightly larger organization are instead discussed among the founders to build consensus.
This all happens without much recognition that the time involved to do so inevitably slows down the needed pace of change for the company to adjust to new scale and demands.
There are no rule books out there saying if you are at a certain size this is how decision making should work.
The Founder/CEO sets the tone of evolving who decides what, with the goal of pushing decisions down the hierarchy to the lowest level possible while still having the company be coordinated with the team in sync with each other.
As the business prospers, we’ll all be successful
As soon as we started scaling up at TriNet, our first managers came in at below market salaries but offset with equity upside. There was lots of risk as our industry was unknown and growth prospects uncertain.
It all worked out as that first group of managers came in with leadership experience that made it possible for us to scale up.
Some transitioned out after a few years, several others stayed on for 10 years or longer. And I’m not thinking there was much regret on the part of anyone who took part in the early leadership team as they were all successful in transitioning to other roles where their TriNet experience was valued. Those that exercised stock options and held their shares also reaped significant financial gains downstream.
CEO’s have the opportunity to articulate an inspiring vision for what individual and company success looks like, while at the same time being realistic with regards to expectations. Leaders who are credible in striking this balance attract high performers to the management team who in turn model that behavior as they become critical links for building the company to the next level.
Developing The Company Requires Commitment
Even if the Founder CEO is able to attract experienced managers to the team, the need for management development to work ON the business will be ongoing.
Throughout my TriNet CEO journey I sought out meaningful development opportunities, sometimes as part of industry or entrepreneur conferences but especially where there would be a gathering of peer CEOs who were seeking to learn more about the same issues I was struggling with.
Extra value came from opportunities where those peers then had contact outside the learning session. Building an expanding peer network requires a time investment that also carries the opportunity cost of stepping outside the business to participate.
I could get pretty charged up after hearing wisdom from a world class speaker on some aspect of company development, but then had to be thoughtful about how to bring that new knowledge back into the company.
Our approach included devoting at least one full day per quarter to strategic planning to focus working ON the business with prepared topics addressing known bottlenecks as we generated new approaches to meet higher production and sales growth we were building towards.
In some cases, we enhanced group learning with outside facilitators. We wouldn’t do it often, but as the team grew this proved to be an additional avenue to help get everyone on the same page for important themes we needed to be in sync.
Define and Work the Plan
With so many other things requiring attention in the business, the only way to mark steady progress is to incorporate company development into the operating plan and then track progress against measurable company goals.
We sought out and followed proven structures that helped us learn from what worked well for others. This helped not only on how to frame company development goals but the internal management reporting that cascade down from the overall corporate plan with operating metrics that were meaningful to the people doing the work inside each company department and work unit.
Supplementing written guidance and goals with an outside coach is another way to insure there are eyes on progress against defined management goals that go beyond financial measures and other targets the Board of Directors should be holding the CEO accountable for.
None of this is easy nor will come together with a process that stays rigid. Like most everything in growing a company, the journey begins with commitment to get it done followed by continuous iteration on the approaches used.
With an expanding team, everyone needs to be engaged in contributing to strategic development even while totally consumed with challenges of dealing with rapid growth.
But I’ll argue that unrelenting attention to working ON the business can be the key differentiator separating those who never make it past the startup stage from those who evolve to become true companies.
Fred’s insights are absolutely on point, and reading them prompted me to dig up an unfinished post of my own on this topic – one that I began writing earlier this year following the exit of TriNet’s long time controlling shareholder, General Atlantic.
For context, consider that TriNet’s annual revenue was about $50 million at the time of GA’s 2005 initial investment and have now grown to more than $2 billion.
More important than the growth capital GA invested, was the expertise and support they provided through our doing 10 acquisitions and transactions, including complex ones like our pre-IPO purchase of a much larger public company which we then took private, large debt financings that benefitted all shareholders, our successful March 2014 IPO and the smooth transition of their shares to Atairos, another large institutional holder so there was no disruption of our share price in the public market.
GA support also was instrumental helping us recruit my successor CEO Burton Goldfield, top quality board members and key executives, all while helping us with a savvy investor’s outside in looking view on important board level strategic and governance issues as we navigated through challenges at each stage of the company’s growth in that 11 year span.
It is hard for me to imagine how TriNet would have evolved to both our current marketplace position and promising path to remain an enduring company of the future had we not had the richness of GA’s contribution led by Managing Director Dave Hodgson.
So it is with some reflection now that I share a few principles on investor attributes I bring up when mentoring entrepreneurs who are in earlier stages in the journey of finding and working with institutional investors.
Companies don’t invest, people do
Institutional investors are duty bound to stay within the expectations set for the limited partners who are the source the fund’s capital. While this baseline can never be overlooked, the partnership responsible for running the fund still has latitude within the fund charter to make the key decisions leading up to when and how the fund ultimately exits the investment.
How that latitude gets exercised has a lot to do with the quality of relationship and trust between the company CEO (and board), with the key sponsor inside the fund – typically the company board member who is at managing director/general partner level in the fund.
The person who is your financial sponsor will end up being the company’s advocate inside the venture fund’s partner meetings where tough decisions are hashed out on things like:
– how the fund’s holding in your company is valued
– whether to increase the fund stake with a new round
– should the sponsor orchestrate a change in company leadership
– how would the fund’s non capital resources be deployed in supporting a company transaction or initiative
– when and how the fund’s stake in the company will be sold
As the CEO, you won’t have insight to the dynamics of those internal fund discussions, but you’ll certainly be dealing with the aftermath once the decisions are made.
So WHO the person is that you are relying on to be your advocate has everything to do with the personal qualities of your sponsor and how well aligned he or she is with the company’s view of playing for long term success vs. building to flip for near term gain when the inevitable unanticipated speed bump occurs in stalled company revenue growth.
Relationships are tested when times are tough
It’s hard to gauge the quality and strength of any relationship when things are going well. But if you’re truly scaling up a company, the truism is that is that even with the boost that might come with a big slug of new equity capital, it is never a straight line to uninterrupted periods of steady growth.
Whether due to bad planning, execution failures or external factors outside the company’s control, the time will certainly arrive when the company misses hitting critical budget goals expected to show progress in the investment.
When things go awry, whoever your financial sponsor is now has the added burden of convincing his/her partners of the fund on whether the setback is navigable or requires an investor driven change (e.g. like firing the entrepreneur CEO).
This requires the partner to have a deep enough understanding of the business and capabilities of the CEO and team, as well as the credibility and persuasiveness to advocate a difficult position that might run counter to conventional wisdom or prior experiences inside the private equity firm.
Don’t shortcut the investor diligence
The best sources to diligence someone who is a candidate to be your financial sponsor inside a fund would be founder/CEOs that sponsor has worked with in prior investments.
Here are a few areas that could be worth exploring to diligence someone lining up to be your financial sponsor:
– How well did the sponsor set expectations and deliver on them? When did he or she have to walk back expectations they previously set?
– Describe examples of where the sponsor dug into the details of the company’s business and applied that knowledge in a way that surpassed contributions of other board members?
– How persuasive was the sponsor at influencing the view of other directors on the board to get to the right outcome?
– How did the sponsor help when company results fell below budget?
– How did the sponsor affect a company outcome that might have involved responding to a company crisis or pursuing a major opportunity in a compressed time frame?
Don’t stop at just one diligence call. Speaking with CEOs from at least 3 former portfolio investments will provide a richer picture than any single source.
Viewing company success as personal success
Like most entrepreneurs who’ve been on a company journey a decade or longer, my ambition has always been about building a company to last – knowing that if the company is able to grow profitably over a sustained period of time it would be achieving what I set out to do in filling a market need and growing a team responsive enough to adapt to ever changing conditions that challenge others in the same industry.
If I was able to lay the foundation for building a company to last, I wouldn’t have to fret about where I would end up financially since the pace of growing the company’s value would far exceed dilution of my percentage ownership stake.
While it’s a straightforward financial proposition to see it’s better to own a minority slice of a huge pie than be controlling shareholder in a small company, the bigger issue many founders wrestle with is whether they can separate themselves from company leadership if that is in the company’s best interest.
Whether the founder opts to exit the leadership team or is nudged by the controlling shareholder(s), either case involves a high stakes transition where the financial sponsor is in a position to influence the outcome in a manner that all involved emerge as winners.
The long game begins with shared vision and trust
Some entrepreneurs, and investors drive towards generating a decent return over the near term by building a company likely to be sold for a profit at the earliest possible time.
If you’re in the other camp of wanting to build a company to last, continuous company growth will still provide meaningful exit opportunities where you could be in the envious position of passing today’s sale to stick with the vision of building a larger and enduring company.
That can end up with a more financially rewarding and satisfying journey, but likely to be achieved only when there is alignment with that shared vision and trust between the financial sponsor and CEO. Figuring that out before the investment is made is the first step towards what can become a long and mutually beneficial relationship.
The entrepreneur gushed “We just closed a $2.5 million Series A on an $8 million pre-money valuation.”
My response: “Great news – now that you’re a couple months past close, what’s the probability estimate of hitting the 1st year revenue target you set for the VC’s?”
The smile quickly vanished as the entrepreneur acknowledged it was far from being a lock to hit the target. Both the risks and attendant pressures were already starting to hit home.
Valuation optimism can be masked with insufficient data
Unfortunately, this is a much too common scenario as founder drive to minimize personal equity dilution by grabbing the fattest valuation possible seems to override their judgment on what happens post deal.
Typically the culprit is too little thought given to the underlying assumptions behind a detailed bottoms up financial model. Proper models take into account factors like average deal size, sales process steps and time to close, productive lead sources beyond executive team personal relationships and diminished close rates of non founder sales reps. [See my post: Leading Sales as a Startup CEO].
The worst offenders set their valuation target first and then back into a set of projections that align revenues with the valuation goal as they scurry about for data points supporting their wished for revenue trajectory.
While VC’s will certainly review assumptions behind revenue as part of their due diligence, entrepreneurs will get some leeway if the product offering is distinctly different with what’s already in the marketplace (thereby lacking trend comparison with similarly situated companies) and you’ve already racked up a few sales to your credit.
Overly optimistic projections come with consequences
The path to judgment day starts with board meetings in which the new institutional investor board members are now brought up to speed with the insider’s view of your progress against the expected revenue targets that were in the deal.
If you’re absolutely confident you’re right on path to meet or exceed the targets then you’re golden.
But if you’re starting to break out in a cold sweat soon after the deal closes, then you’ve got the hard choice of perpetuating expectations you may not have confidence in or going about the delicate process of resetting expectations.
Perpetuating the improbable is a gamble that ever optimistic entrepreneurs take, believing somehow, someway they will find a solution over time.
However, as projections don’t get fulfilled, that factor alone becomes the biggest reason entrepreneurs get pushed out of the CEO role in favor of someone who has a proven track record of “meeting the numbers.”
And that equity stake the founder was concerned about? When projections get missed and Series A funding dries up while there is still a substantial burn rate – you then have the classic down round scenario where in order to keep the company alive with a new financing, founder shares can get crammed down to a pitiful percentage of ownership compared to their post series A stake.
De-risk with detailed assumptions behind revenue components
You can mitigate risk by building a detailed model for how revenue projections are derived.
List assumptions behind each component of a revenue formula so there is complete transparency and no “black box” – even tilting assumptions towards most realistic, if not outright conservative achievement at critical components of the revenue formula.
The best entrepreneurs don’t settle on just a high level view of 2-3 revenue component steps to come up with a formula. Instead they tear apart every step in the customer acquisition process to find patterns which can be reasonably tracked (with a minimum of admin burden) that help point to predicting success at that particular step in the sales process, and in the aggregate – timing of future revenue flows.
Since early stage companies typically won’t have a large enough team for a professional CFO on staff to build such a model, they can fill the expertise gap with an “Interim CFO” who has the background and strategic perspective to dive in and gather input from multiple team members to guide a true bottoms up model with detailed, defined assumptions.
The best interim CFOs divide their time among a cadre of early stage companies and often have the pattern recognition of having been through this exercise across many similarly situated companies. This helps not just in developing the model but with an ongoing retainer relationship will help their client tweak the model as more data comes in and analytics for management and board are refined.
While it’s best to avoid optimistic projections pre-deal, the earlier that investor expectations get reset to the proper level the more likely you are to retain your credibility as a leader.
So don’t wait for your next round to beef up the visibility and accuracy of your forecast. When you’re depending on other people’s money – than your success, and that of your company, may end up riding on how well you can predict the future with a financial model that you actually deliver on.
My wife’s Dad passed on May 26th, a few months shy of his 99th birthday.
A long life, well lived. In every respect, Chrisopher Spagnola was the epitome of our “Greatest Generation.”
Like others born into large immigrant families Upstate in the early 1900s, his growing up in the depression era faced hardship that shaped life perspective and was then reset by the enormity and calamity of World War II.
Volunteering to serve in the Army Air Corps, Chris quickly advanced to flight school where he was commissioned an officer and at 23 years old, commanded a nine man crew as he piloted a B-24 bomber in the European theater.
He flew combat missions until Germany’s surrender and his 36 combat missions exceeded the 32 mission requirement making him eligible to return to the U.S. for non combat duty. To put this in context consider that by his volunteering to fly more combat missions, he was aware that within the 8th Air Force Bomb Group he was part of there was about a 25% fatality rate on the bomber missions being flown in that time period.
Awarded the Distinguished Flying Cross and seven other medals recognizing his extraordinary valor and combat record, Chris continued his military service in the Air Force Reserves, retiring as Lt. Colonel in 1972.
At the close of WWII he returned to Auburn NY where he married his hometown sweetheart Clementine “Dutch” Boglione for a union lasting 62 years until her passing in 2010.
In 1946 he obtained his commercial pilot’s license but declined an offer to fly for American Airlines to instead begin building the Auburn Foundry company – which he ran as co-owner and President until his retirement in 2006. The business remains one of Upstate’s last independent foundries – a testament to the strong foundation and team he built.
Putting others ahead of self
Given his war record, extended military service and success as a local businessman, accolades from those exploits alone would be a full life for many. But for Chris, life wasn’t about achievement as much as it was making a difference for others in ways that might not garner recognition, but truly had an impact.
He volunteered across a whole range of organizations like Knights of Columbus, Kiwanis, his local golf club and others. Chris successfully led an effort to engage an entire neighborhood of lakeside residents to pool their resources for creating a paved county road and bring in sewer and water to the area – something that would not have happened without a collective citizen coalition such as he put together.
Beyond being active as a leader who got things done, it was Chris’s persona of easy going, rock solid integrity and always sensitive to the feelings and situation of others that endeared him to all he met.
He lived a Christian life doing things that made a difference in the lives of others, including for disadvantaged people on the margins of society. Appreciated by his community, he more than deserved the reputation of being a soft spoken, low-key hero.
Role model for the next generations
Chris was a hero to me and someone I appreciated from the first day we met 40 years ago.
As I matured, I also grew in my understanding of how the role model he was influenced his daughter Krista in ways that both attracted me to her and set the foundation for own marriage.
So as our children were in elementary school in California, and we thought hard about our priorities in their upbringing, uprooting from Silicon Valley in 1999 to come home was very much based in having our kids take advantage of the special grandparents they had.
These last 17 years with him have been more than special. As saddened as we are to no longer have him with us, we’ll forever cherish both the memories of our time together and how lucky we were to have him be such an influence in shaping our lives.
The example he set in living a truly full and impactful life inspires me, our family and the lives of others he touched. His legacy lives on and will never be forgotten.
“Those we love can never be more than a thought apart, for as long as there is memory, they’ll live on in the heart.”
Pelican Bay Supermax Prison. I’m locking eyes with Gary, separated by a perforated metal screen as zero physical contact is permitted with residents of the Secure Housing Unit (SHU), the prison’s solitary confinement facility.
While I’m aware Gary has been “inside” for more than 15 years, I’ve no inclination to ask about his reasons for being here.
Instead, we’re focused on an exchange guided by Defy Ventures CEO Catherine Hoke as I’m part of a team of 20 volunteers who are all facing individual SHU residents and now engaged in a series of interactions advancing each resident’s ambition to change their life by taking advantage of Defy’s highly refined program featuring guided personal development with many check points for accountability along the way.
The warden tells us it is the first time a group exercise has ever been done at Pelican Bay SHU, as no organization has ever ventured in with a track record to suggest having an impact on this segment of residents who are as isolated from society as you could possibly find.
Defy Ventures is a seven year old non-profit committed to reducing America’s recidivism rate. More than two-thirds of those released from prison, returned to incarceration within 5 years.
This mind blowing rate of returning people to prison is just one of the forces propelling the U.S. to hold 25% of the total prison population of the planet, even though we have less than 5% of the global population.
While other forces like lack of opportunity in disadvantaged areas, broken families, substance abuse, underperforming public education, electoral politics and inherent bias in the criminal justice system all have layers of contributing factors that go beyond the scope of this post, no one would disagree that a primary goal of our prison system should be to rehabilitate the incarcerated so those released can be productive in society and break the cycle of criminal behavior that too often continues into succeeding generations.
Not surprisingly, as employers are reticent to hire released felons, a parolees’ lack of opportunity to progress in society erodes hope and triggers gravitational pull back to the relationships and environment, which too often leads to a subsequent criminal act.
Defy’s approach to addressing this seemingly unsolvable problem is to help both prison inmates and recently paroled join on a committed path as Entrepreneurs-In-Training (EITs) – enabled by a combination of tightly structured self development and hands on help from a cast of highly accomplished volunteers.
The results of this program are nothing short of astounding. Of the 2,000 Defy graduates, 166 businesses have been created, spawning 350 new jobs for people with criminal histories.
Defy has had only 3.2% of their graduates return to prison. When you consider the cost of incarceration in California is $70,202 per year per inmate and an investment in an in-prison Defy EIT is $500, that results in a 294x SROI for California’s taxpayers.
But the win is far more than dollars saved as the real victory is putting individual lives on a productive path, breaking a cycle of returning to criminal behavior and bringing positive effect on lives surrounding the EIT like their family, friends and others seeking to break away from criminal behavior.
Everyone Invited, Only the Committed Advance
Being an entrepreneur is an alluring path for many, especially people with a limited range of options available to them. But only the committed will thrive as the failure rate for small business is often cited at 80% within the first five years.
Defy has evolved their entrepreneur development program so that it combines online and in-person exercises requiring an EIT’s sustained commitment to advance towards graduation.
Parolees access Defy’s online learning modules over the web and because, inside prison this is typically not an option, Defy’s video based learning can be accessed on the prison’s TV network.
At each phase of development, EITs are given assessment exercises that are tracked for completion through Defy’s Learning Management System.
In both “inside” programs and those on parole, EITs form support groups where they are helping each other stay on track, forming relationships with those who share a common ambition of finding success through entrepreneurship and strengthening commitment to avoid returning to a criminal life.
Mutual Respect Begins With Shared Understanding
As EITs progress in their development, they are offered opportunities to participate in high impact personal interactions with a very impressive group of experienced entrepreneurs, executives and investor volunteers.
Through a series of interactive exercises, volunteers and EITs come to know each other and learn about each other’s lives in ways that highlight their differences and similarities. In one exercise, separate lines of volunteers and EITs face each other, then step to a center line acknowledging how environment, family and impact of selected circumstances played out with either fortuitous or unfortunate outcomes now determining their status as an EIT or professional volunteer.
It is the similarities more so than the differences that are striking for me.
Like most volunteers, it is a huge “aha” moment to wrap my head around the realization that, with just a minor twist in my own life circumstances, it could easily have been me standing in the EIT line or see EITs with the clear potential to have ended up on the volunteer line as successful professionals.
That shared understanding of each other’s position begins the process of building mutual respect that in turn powers advancement of both EITs and volunteers in our respective journeys.
For in-prison events, volunteers provide coaching to EITs on topics that include articulating their personal elevator pitch, resume feedback, mentoring on the business idea the EIT is developing and participating in pitch competitions.
Volunteer support for those who are released include those activities as well as supporting and tracking an EIT’s progress and linking EITs to resources that can help their business succeed.
In all situations, EIT contact with volunteers follows a strict protocol managed by Defy in a way that preserves privacy and security considerations.
A Different Kind of Volunteer Impact
Since I was already deeply engaged in helping lots of first time entrepreneurs, the fit for me to check out Defy was pretty easy. While the audience was different than the startup world I am typically engaged in, the activities seemed right within my wheelhouse.
My expectation before volunteering was that my ability to have impact would be based on my knowledge, entrepreneurial experience and relationships I could bring to the program.
But beginning with my first event, the nature of my interactions with EITs were in such sharp contrast with the traditional world of helping startups I began to understand this was less about my professional qualifications than it was an opportunity to grow by being vulnerable and giving without expectation of return.
You see in the traditional startup-coaching scenario we don’t spend much time showing personal vulnerability. We go right to diving in with the help and expertise we think we’re there to give.
And even if we tell ourselves we have a “pay it forward” mindset, we know the startup world has so many interconnected relationships there are paths where our volunteer contributions may come back in some form of unexpected reciprocity – be it new deal flow, a helpful entrepreneur or investor contact, or referral to a highly valued source that can help us.
Defy Interactions Can Be Transformational
The Defy personal interactions are humbling in their effect of acknowledging vulnerability and rethinking about forces that led to how I arrived at the stage of my life where I can qualify as a Defy volunteer.
And when there is zero expectation of reciprocity, it forces the commitment choice on what my real reason for volunteering is – am I sincere enough in my values to walk the talk of pay it forward, or not?
Locking eyes with Gary and continuing our discussion through the perforated metal screen brought home that realization on how any impact I was having wasn’t about my professional experience, but instead my ability to show understanding, compassion and commitment to someone otherwise cut off from society.
I’m thinking that after our exercise concluded, Gary replayed the interaction in his mind as many times as I have. For different reasons, perhaps we both came away feeling we grew as a result.
So my own success measure for Defy volunteer participation is now flipped from where I was at the outset.
These powerful in-person interactions have done much to alter my personal outlook in a transformational way – something that I simply don’t get in the traditional role of mentoring startups headed by people that have already been dealt a pretty good hand.
But that benefit of a transformational outlook comes only as a result of participating with Defy in person.
It’s alluring enough to keep me coming back for more, and is probably the underlying force behind Defy’s high rate of returning volunteers – which is the only kind recidivism you really want to see!
A delegation of a dozen business and professional community leaders from Binghamton took a day out of their already busy schedules to travel to Syracuse. They toured assets in the Syracuse startup community, and interacted with local leaders to learn from their experiences in building startup community.
The delegation included people from Binghamton Chamber of Commerce, City government, Binghamton University and local business leaders. These people are committed leaders with a stake in growing Binghamton’s startup community. They understood the value of getting an inside look at steps a neighboring city went through to build momentum around creating companies and jobs in newer industries. These efforts are now attracting top talent to a revitalized downtown area, and certainly worth paying attention to.
Journeys begin with vision
CenterState CEO’s Rob Simpson welcomed the delegation and provided an overview of some initiatives that started a decade ago. This ingenuity included critical public private partnerships, which set the stage for today’s job creating thrust.
A tour of the Syracuse Technology Garden, undisputed hub of Syracuse’s tech community, featured a recap of programs and entrepreneur supporting activities. Rick Clonan presented, and had John Liddy, Founder and Director of the Syracuse Student Sandbox sharing insights on how the college student accelerator engaged local mentors that were critical to graduating students deciding to put their roots down in Syracuse instead of going elsewhere to start their first company.
A tour of Syracuse CoWorks, a nationally prominent co-working/living space, provided an inspiring look at how downtown space can be configured to foster relationships that attracts both millennial entrepreneurs and residents. The “community” also serves as a base for StartFast Code – a coding academy that puts individuals on a career path as professional web developers or helping advance their existing businesses.
Final stop was SpinCar, graduate of StartFast 2013 cohort and now a blossoming company with 40+ employees headquartered in Syracuse. Co-founder Mike Quigley shared the SpinCar story, including how the community helped his team on the path to success. This included connections to key people and resources of which Mike says made all the difference in SpinCar getting to the right customer market, finding investors and talent.
We closed the day with an engaging discussion around elements of a strong startup community. This long-term outlook and willingness to cross geographic and institutional boundaries relies on people working in concert. The result is connecting entrepreneurs to the resources needed to grow companies and create high-paying jobs.
True leaders break new ground
Five or more years ago, we could not have seen a delegation from one of our Upstate cities traveling to another community to learn about building a startup ecosystem like this. Not only would best practices have been harder to identify, but the interest to travel and learn from others just wasn’t getting any traction.
Over the last year, I’ve spent a lot of time in Binghamton and I’m impressed with the seeds of change that have clearly been planted. There is no doubt that this group of leaders, who are crossing boundaries are leading the way in accelerating change. Working together, we’ll have a meaningful impact in growing companies and creating jobs in Binghamton’s future economy.
I just completed a drive home to Little Falls, New York originating from the San Francisco Bay Area.
With a few zigs and zags, it was about 3300 miles over 8 days.
This was my 9th cross country road trip, but the first with my son Jared since 1999 when our entire family relocated from Silicon Valley to my Upstate hometown by way of a 2 week cruise in an RV. He was then 6 years old so memories were a bit sketchy for him about that experience.
Now as a young man with an experienced traveler’s curious eye, Jared’s interest in a road trip evoked a positive reaction as soon as I brought up the idea.
While the ostensible reason was to transport a car we had in California to our home in Little Falls, I didn’t hide my interest in both the road trip experience and our spending some quality time together.
Because of winter weather risk traversing the Rockies this time of year, we took a southern route heading east along Interstate 40 and the old U.S. Route 66.
Desert and high plains from Las Vegas to Santa Fe were particularly scenic, and we veered off for side stops sometimes on a whim – like after seeing roadside billboards for the Billy the Kid Museum in Fort Sumner, New Mexico.
In comparison with cross country trips I did a decade or longer ago, I was struck this time by how much easier it is now with so many enhancements in the richness and ease of accessing information while on the fly.
We began the drive with no more planning than a general idea of the route and then made it up as we went along each day.
Google map features making it easy to pick up interesting attractions and stops along the route added to the process of discovery – so there was no difficulty in figuring out options we wouldn’t be experiencing back home, including dining in memorable settings like The Big Texan in Amarillo.
In picking the route we also stopped by to see a few friends, each of who had something to add to Jared’s experience. Our most memorable being time with my personal hero and mentor Jack Stack as we re-connected with him for the first time in about a decade.
The highlight for me though was the time Jared and I spent being together without distraction of outside influences. Sharing our observations, perspectives and thoughts in a relaxed way without the pressure of the next deadline or meeting.
We know that the convenience and relatively low cost of commercial air travel combine to put a big dent in long distance family road trips.
The wider range of leisure options we can easily find also builds a subtle time pressure to pack as much as we can into any time off period, perhaps sometimes with a feeling of being ready to tell others about where we’ve been over vacation.
Call me old fashioned, but I still like the road trip as a choice on the week or longer vacation menu. There is so much diversity in scenic beauty, attractions and culture right here in the U.S. Sharing with those we love is an experience best savored without tight timelines driven by flight schedule and limited time in a single location.
I’m a lucky guy to have a 23 year old son that shares that interest and still travels with his Dad. We made some memories together that will be with us always – and that’s what leisure time in our family is all about.
It’s almost a fist to the head kind of moment to realize I haven’t put a personal blog post up on this site since February last year.
Those that have regular contact with me know the story, but I suspect there are others on my distribution that weren’t aware of how my 2016 evaporated with my entire focus for the year spent pursuing a bid for U.S. Congress in New York’s 22nd District.
Adding to the improbability of the story was my choice to run as a third party candidate – seeking to buck the odds since no one has successfully done that in the last 5,000+ congressional elections since Bernie Sanders in 1990.
But then, entrepreneurs aren’t afraid to pursue the improbable and the entire effort was centered around my message of spurring job creation through the very things I’ve learned in my journey of starting and growing non profit Upstate Venture Connect these last seven years. Our mission there is to build scalable pathways connecting first time entrepreneurs to the resources needed to grow companies in new, fast growth industries. We are pushing Upstate NY’s economy in the direction that not only leverages our assets, but can actually succeed through private sector rather than government driven programs.
While I did not win the election, I’ve absolutely no regret for having run the gauntlet of a difficult, and sometimes vicious campaign fight that was an immersive and total learning experience from beginning to end.
Even though there is a most interesting backstory on how major parties and related special interests rig the system to stymie independents from advancing, I won’t be blogging much with retrospective campaign reflections or commenting on the dismal state of our political affairs.
Those people interested are welcome to browse through the Babinec For Congress site and if suffering insomnia, might watch one or more of our short documentary videos on Running Independent.
But I will share that the big motivator for me to run as an independent was realizing how the quirk in NY State’s election law permitting fusion voting actually gives minor parties a terrific opportunity to influence the political discourse by attracting major party candidates to co-list on the minor party lines.
So my personal quest in advancing the Upstate Jobs Party will continue and I do expect to put some posts up that share some of what I learned from my foray into the political world – including how entrepreneurs and others who care about job creation can make a difference at influencing a broader community without resorting to the quagmire of seeking change through public policy.
And since I’ve now re-engaged in growing Upstate Venture Connect and resumed investing and mentoring more startup entrepreneurs, you can expect to see more posts on these topics as well.
Looking forward to diving back in and hope to see comments and feedback as we re-energize building community.
Overcome seed investor exit bias with vision and passion
As an active seed investor with my UpVentures, it’s not unusual for me to be weighing odds of investing in one company with some plausible acquirer targets on the horizon, versus another startup with a more speculative moon shot based on a large, but totally unproven, market opportunity.
This dynamic plays to entrepreneurs too. Wouldn’t a more likely pay day come in a space where others have shown some traction, ahead of being out there on the “bleeding” edge because you’re pioneering something that almost no one else sees yet?
There is no absolute here. Though as a seed stage investor, it is probably a good idea to have a portfolio with a mix of these two opportunity paths.
Investors can under appreciate market timing
Being ahead of the curve in a new and unfamiliar industry raises seed investor uncertainty about where the exit paths will be. This prompts a subtle bias for us to instead focus attention on opportunities that seem to have nearer term possibilities for liquidity.
But as IdeaLab founder Bill Gross recaps in this video reviewing data from 110+ companies he had a hand in, his search for causality in the factors of idea, team, business model, funding and timing (five classic early stage investor criteria) shows evidence that market timing had more to do with startup success than any of the other key criteria we seed investors rely upon.
Even one better is the wisdom of Paul Graham and his insights that come from decades of seed stage investing and running Y Combinator.
While multiple Paul Graham essays touch on this theme of market timing, one of my favorites is Black Swan Farming – he nails this seed investor bias against new models and markets by sharing logic behind his thinking why he felt Facebook was a lame seed investment opportunity when he first heard of it.
Biggest opportunities powered by multiple macro forces
While startups generally have some kind of societal, market or technological trend underlying their plausibility for being an investable growth business, if you parse through any list of $1B+ exits, you’ll see the big winners enjoyed a confluence of multiple macro trends that drove growth for an extended period.
My appreciation for this factor of multiple trend convergence began as it was probably the biggest reason prompting launch of my own startup journey in founding TriNet in 1988.
While very much a rookie entrepreneur then, I was more than a little passionate about how certain trends were both irreversible and directly related to powering our business model behind outsourced HR services including:
Increasing government regulations burdening employers
Shift in employment landscape from large companies to small
Smaller companies needing benefits to compete for talent (previously the domain only of big companies)
Technology adoption driving both speed of business (narrowing core competency that would in turn drive outsourcing) plus add new capabilities to enable efficiency in service delivery across a large number of smaller company customers.
As obvious as these trends might seem today, the late 1980’s was a different world and even venture investors couldn’t warm up to our opportunity since they didn’t then appreciate how our perceived pure service business could be sufficiently technology enabled to scale and leverage these converging trends as fully as TriNet proved to do.
Winning entrepreneurs articulate vision with passion
Vision and passion are important for any startup CEO. But if you’re forging new paths in unchartered models, you’ll be hard pressed to raise seed funding without a founder CEO getting across both these qualities.
Take the time to unpack specifics behind your supporting macro trends. Cite independent sources with data that supports your thesis. Tying multiple trends to defined elements of your business model and execution strategy boosts credibility in your vision.
But even those actions are not enough to sway seed investor interest if there isn’t a clear sense of deep personal passion on why this means so much to you.
Passion comes through when investors become convinced about the entrepreneur’s emotional commitment to the “why me” behind the problem the venture is solving. Our senses pick up the cues for this emotional commitment probably more so by how you articulate, than the logic supporting your argument.
A deep, passionate commitment is essential to overcoming the many obstacles ahead, including attracting the right team members who you’ll be asking to take their own risks in joining a team with an unproven model and/or industry.
Entrepreneurs who get seed investor attention are the ones whose vision and passion are so ingrained in their persona that they clearly differentiate from the crowd of their startup peers.
So don’t fear being “over the top” in getting across your passion and commitment. How you message that emotional commitment, coupled with a clear vision that ties specific trends to your model is what we’re looking for.
Winning investor hearts, along with our minds, is the combination that unlocks wallets to speculate with even greater risk than the semi plausible exit strategy we’re weighing you against as our investment alternative.
Tips for pitch event organizers and startup founders from an investor’s perspective
Last week I attended a local pitch event for the Upstate tech community that included four entrepreneurs pitching their startups. Like many other such events, the audience was a mixed group of entrepreneurs, community supporters and a small handful of investors.
The pitches unfolded in typical fashion. When I saw the most common pitch errors across each of the four presenters, I did wonder about how the event organizers went about setting expectations and guiding the entrepreneurs doing the pitching.
Entrepreneurs know these opportunities are important. They definitely spent time preparing, yet missed the chance to deliver a compelling case. Most importantly, none of the presenters specified what help they were seeking.
What follows in this post are a few suggestions aimed at both event organizers and pitching entrepreneurs who seek to avoid the boring pitch syndrome.
Tip #1: Problem and solution are not enough
Entrepreneurs (particularly those with a technical background) fall too easily into the trap of using precious minutes in a pitch to dumb down the science. They hope to compel the audience by spelling out the technical challenges that were overcome, and the uniqueness of the startups’ product design.
If half or more of the pitch is spent defining the scope of the startup’s technology, it comes across like an academic exercise. The presenter is seen as working too hard to impress with his or her technical mastery – shortchanging the opportunity to secure support beyond defining problem and solution.
Tip #2: Pitch to investors, even in mixed groups
Even in situations where there is a mixed audience with diverse backgrounds and interests, I’m a fan of crafting pitches as if the entire audience were investors.
Everyone wins by taking this approach in the pitch because:
A standard set of guidelines can be provided to all presenters that directs them to a specific outcome
The event can run on a consistent track, making it easier for the audience to compare pitches with a lens that helps everyone think about how investors look at who to fund
The entrepreneur gets an opportunity to further hone the investor pitch, addressing things like business model, channels of distribution, margins and other critical business issues
Tip #3: Close with telling people what you want
I believe it’s essential to end a pitch with a specific appeal for help. Often times someone in the audience can assist the entrepreneur. They just need to ask!
Requests for help shouldn’t be limited to financing. Telling people what else your startup needs right now gets everyone thinking about how and who they know that can assist.
Whether it’s introductions to a specific type of customer or channel partner, or finding new team members, mentors and service providers, pitching is an opportunity to make a personal appeal. Someone in the audience may know the right resource for your company, but only if you tell them what you need.
Tip #4: Event organizers call the shots
With so many startups clamoring for the opportunity to get more exposure, event organizers have the leverage to set high standards for who they choose to present.
Instead of filling slots with whoever raises their hand first, consider inviting entrepreneurs to apply for the opportunity.
Even better, give them a short set of pitch guidelines on what you would like to see included in the pitch, and ask them to send a sample deck for you to evaluate.
It’s ok to tell applicants that their submission is just a sample. Ideally you and members of your supporting team can guide development of the final pitch so that it meets your target standard.
If you need pitch mentoring support, resources like Upstate Venture Connect’s UNY50 Network or investors in any of our local seed funds can help. These same groups can also help recommend qualified startups to pitch.
Setting a high standard for your pitch events, and helping startup founders deliver compelling pitches will not only satisfy your audience, but reflect well on you as a sponsoring organization.
Just came off a very fun and worthwhile weekend at the inaugural CatskillsConf – a three day affair that brought together an eclectic mix of creatives, tech people, foodies and startup community supporters.
Was cool not only because the organizers were able to successfully pull off marketing to assemble 120+ people that touched on all those themes, but the diversity included an audience nearly evenly split between Upstate and NY metro.
This was the first ever such gathering in the Hudson Valley/Catskills area. It came about after founders of the Hudson Valley Tech Meetup (Dan Stone, Daniel and Sabrina Shutzsmith and Kale Kaposhilin) met Aaron Quint, (web entrepreneur and former Paperless Post CTO/Chief Scientist) who recently transplanted from NYC to the Hudson Valley.
Pooling their combined organizational talents, passion for bringing people together and lists of contacts is what catalyzed CatskillsConf and their joint marketing outreach filled the room.
Leveraging Local Assets
Whether it was musical talent, farm to table culinary, wood crafts and natural settings of the Ashokan Center, this was a thoughtful mashup that brought diverse elements together with common themes that spoke to the millennial target.
On the learning side, my personal favorites were Dennis Crowley’s “put it all out there” story reflecting struggles at different stages in the startup journey, and also an amazing education segment featuring live birds of prey doing their thing.
When you’ve got a group together for more than a day, it gives opportunity to go beyond a large group learning setting to do some things that can be hands on, fun and social – all adding to the potential of building on strong relationships among participants.
The Catskills flavor for small group activities included options like foraging, blacksmithing, cider making, bookbinding, and drone piloting to name just a few.
Institutional ownership not a requirement for success
More than just a well run event, what’s unusual here is that the outcome wasn’t oriented towards benefiting a particular organization – but rather to just grow the relationship networks for participants, while having a fun time and creating many memories.
My boomer generation just isn’t used to seeing grass roots organizing like this without institutional ownership and resources.
New relationships will yield downstream benefit
As I browsed around, a frequent comment from local tech people sounded like “I used to think I was the only person around here like me. As a result of the groups forming and events bringing like minded people together, I’ve now got a growing network of supporters to help me.”
As I try to calculate the number of “creative collisions” that occurred and what happens when like minded people stumble into each other for the first time, there is little doubt that startup formation and growth will include some life changing outcomes sparked by what seemed like chance encounters.
Good things happen when a few people step up to lead
Kudos to the organizers as they took financial risk and put in a ton of hours along with a full supporting team of volunteers.
They set an inspiring standard for others to follow and their leadership adds further fuel to my optimism about why it is the millennials who are making the difference in powering Upstate towards a big jump in the number of new industry companies and jobs that will rise here from humble beginnings as people meeting at an event that then lead to collaborating on a startup.
We pledge our resources at Upstate Venture Connect to support their efforts and look forward to doing the same for all others ready to lead the charge in their own local market.
With a twist on the traditional “Entrepreneur of the Year” awards celebration, Upstate Venture Connect has partnered with Upstate Venture Association of NY to do our first ever celebration to recognize people who are making a difference in building our burgeoning startup ecosystem across the Upstate region.
Entrepreneur leaders make things happen by powering the launch and growth of activities and initiatives ranging from Startup Weekends, angel investor funds, accelerator programs, tech meetups and hackathons to name just a few from the diverse range we already see here in Upstate NY.
Who comes to mind in your community that is out front and leading with their actions to help startup entrepreneurs launch and grow companies?
All too often, startup community leaders are people motivated by no more than wanting to leverage their time and talent to make things happen. Our goals include putting the spotlight on those making a difference as well as sharing examples that will motivate others to step up and lead.
Don’t delay as nominations close Monday August 31. The nomination format is easy – if you know someone making a difference they will be in good company.
Sign up yourself to attend our October 9th celebration luncheon at Turningstone Resort in Vernon. We anticipate a turnout of 2-300 people who are leaders and supporters from throughout the Upstate startup ecosystem.
Join us in the fun and show support for those that are building Upstate’s startup economy.
TriNet’s IPO was the culmination of contributions from a ton of people over a very long time period.
Few outsiders were aware that our management team adopted a philosophy of being “public company ready” way back in 1994.
Over the two decades from then till going public last March, our leadership team had several themes related to readiness that served as key filters for decision making in both setting expectations and allocating resources.
Being accountable to a budget
Paramount on the list of readiness factors is defining a realistic growth budget and then delivering on the results.
While all CEOs espouse the importance of this basic principle, now that I’m an active early stage investor with an inside look into a large number of fast growth private companies, it seems only a small minority of those I see come even close to that deep commitment of learning how to deliver on budget expectations as they are scaling up revenue.
All companies going through a rapid growth phase encounter uncertainty around market adoption as well as unexpected bumps from the external environment – be it competition, market forces, technology changes and government regulation to name just a few.
And the faster the growth, the harder it is for the team to adapt as they have to evolve internal processes that affect consistency in how the company attracts, prices and services customers at higher volume – all of which ultimately drives the forecasted results.
But the public company principle is that as leader, I was never in doubt that my tenure as CEO was directly related to my ability to accurately predict the future in terms of where our revenues and profitability would be up to a year or further out from where we were at any point in time.
So developing competency in how to do that wasn’t something that I could learn in a single year or delegate to someone else, but instead had to work towards instilling commitment to setting and delivering forecasted results throughout the entire company every single quarter.
Institutionalizing Accountability Begins With CEO Direct Reports
Even if the CEO is “all in” on the importance of setting realistic targets and delivering on that, no single person can make that happen on his or her own.
If I was being measured by how accurately I could predict future quarters, it wasn’t a big stretch to say that should be the same approach in how I looked at my direct reports.
That put my focus on making sure I was getting that intense commitment from my direct reports to both setting expectations within their respective department, and that those commitments were direct linkages to support achievement of the overall budget – especially on how everyone in each department was contributing to growing revenue.
It was up to me to define the process by which we would define and track progress of goal achievement and set the example of holding my direct reports accountable by showing consequences to the reporting executive if goals were not achieved.
Consistency in doing so, as well as supporting systems to report and track goal progress both helped push this approach company wide.
Transparency with Investors and Team Members
Predictability in delivering forecasted results is closely linked to having enough detail in the assumptions driving the budget to be understood by key stakeholders.
Initially, this is the Board and management team, but we found it very high impact to expand the knowledge and transparency through the entire company.
We boiled down a set of business drivers appropriate for full team consumption internally and then constantly reported on our progress so everyone knew where we stood against a full range of operating metrics and budget assumptions.
Another aspect of transparency was our internal mantra of “no related party transactions” as we knew any hint of executives or shareholders having anything less than an arms length arrangement would be a red flag that blows management credibility with sophisticated investors.
Having a “Big 4” audit firm is a huge boost for transparency. We took that on 20 years before going public and never looked back, notwithstanding the extra layer of fees we paid even through the lean years just we could hold to that standard.
Earlier start builds competency
In TriNet’s case, our public company readiness philosophy got a big boost after taking on a large public company as our controlling shareholder in 1995.
Even though we were a small entity rolling up into a big corporation, the public company principles were very top of mind to us as we planned and executed corporate governance over the next 10 years.
Our public company readiness ended up being a significant factor in TriNet’s successful transition from the corporate controlling shareholder to General Atlantic, our financial partner and controlling shareholder since 2005.
I can look back now and see how critical these steps were to laying the foundation for managing through challenges of an evolving institutional shareholder base – the most important undertaking any CEO who wants to be around for the long haul can take on.
And while few high growth companies will find their shareholder exit in the form of an IPO, those same public company principles will insure a stronger company on every dimension that is important to success for both internal and external stakeholders.
As I meet entrepreneurs seeking to launch their first startup, I’ve begun noticing behavioral traits I wasn’t paying much attention to before.
Signals I’m picking up more frequently are from entrepreneurs coming across as super confident (even aggressive), perhaps in an effort to show they are hard driving and ambitious.
While confidence in one’s beliefs is indeed a critical asset for a startup entrepreneur, my BS detector begins kicking in when I see a total absence of humility. The tells are things like:
– working their accomplishments into the conversation
– no hint of what they don’t yet know or are seeking to learn
– expressing no curiosity about whom they’re interacting with
– interactions appear motivated only by potential self interest – no evidence of “pay it forward”
– how they interact with others who serve or bump into them seems different than their style of interacting with those in a professional context
Because I’m an investor who looks hard at leadership qualities of the CEOs I want to work with, my mind gravitates towards thinking: “If this is what I’m noticing now, I wonder how it translates to future interactions this entrepreneur has with others they seek to recruit and lead?”
Humility as a leadership trait
If you’re looking for thoughtful insights backing up the quality of humility in leaders, check out Jim Collins’ Good To Great and his work profiling Level V leaders. His research supports the thesis that CEOs embodying the unusual combination of fierce resolve and personal humility ended up being a critical leadership trait for top performing companies in the study.
My own view was shaped most by my Dad and my wife Krista, but also the good fortune of having close contact with a bunch of exceptionally strong leaders who personify humility in how they lead and interact with whomever they meet.
Jack Stack, Founder/CEO of SRC and visionary behind the Great Game of Business would certainly top my list in exemplifying resolute commitment and personal humility. SRC is not only a phenomenally successful company that has transformed thousands of lives, but beyond Jack’s Southern gentleman’s humble style, his open sourcing of the GGOB and open book management practices empower a generation of entrepreneurs like me to embrace principles around getting everyone in a company to think and act like owners – the ultimate management humility as it means running an organization with the power bubbling from the bottom up.
Back in 1995, Anthony Martin, now retired Chairman/CEO of global staffing giant Select (and subsequently Vedior) picked TriNet to invest as one of the 40+ companies in his portfolio. Much to my benefit, he traveled “across the pond” for 10+ years to sit on TriNet’s Board of Directors. Soft spoken with never a wasted word, his gracious, gentle, almost patrician manner helped set the tone for our board meetings with wisdom that came through penetrating observations and questions that were so much more effective than the contrasting style of boards featuring competition to demonstrate who is the smartest guy in the room.
In the emerging tech world, anyone that knows or interacts with uber VC Brad Feld (@bfeld) will attest he gives so much of himself to so many causes (building entrepreneurial ecosystems, women in tech, computer science education and entrepreneurship globally to name just a few) and notwithstanding an incredibly packed and productive schedule and contact list, still shows an uncommon curiosity and willingness to pay it forward with each new person he bumps into.
Humble, super successful people stand out
So I take notice when I encounter a super successful person who isn’t showing the expected trait of being the center of attention in a dialogue among a small group.
My respect grows as they instead show curiosity in others and demonstrate care and concern for people they don’t know, as well as how they contribute talent towards things not driven by self interest.
Encounters like these also reinforce my not losing sight of humility in what I say and do.
Paying it forward is going to be a theme I hope to keep shining more light on. Not only to help keep me centered, but also my belief that raising awareness of success beyond financial measures is the real story behind entrepreneurs with the most impact.
While the article wasn’t inaccurate, I can see now that when people think of entrepreneurs helping startups and the word funding is included, than conclusions gravitate towards this being about investment dollars going directly into startups.
It’s true that I’m one of Upstate’s most active startup investors. I’ve touched more than 70 companies through both direct investments and LP relationships in seed and private equity funds. My portfolio and investing interests are profiled on my UpVentures.com site.
But the High Growth Entrepreneur fund at HOC Community Foundation is different. That fund is not about my investing directly in companies, but instead towards supporting infrastructure that helps build our local and regional startup ecosystem.
Startup Ecosystem Infrastructure
For me, startup ecosystem infrastructure includes things like programs, activities, events, online assets and other resources that help bring the right parties together.
Building such infrastructure is my full time volunteer role as I created and help run Upstate Venture Connect, a 501c3 non profit now in our fifth year of operations. (Visit UVC.org to see some of our program initiatives and resources that bring entrepreneurs into contact with others who can help.)
Also being worked on is launch of a Mohawk Valley seed capital fund comprised of high net worth individuals qualifying as accredited investors who work together to invest as a group, as well as help mentor and support the startups they come into contact with.
With the Community Foundation donor advisory fund I’m interested in supporting leaders with similar ecosystem building aims – likely to include some new ideas on what could bring the right people together such as experienced entrepreneurs, technical talent, investors, service providers even academics and community leaders. The common denominator is a personal passion for being committed to help startups.
Who knows? Maybe a Startup Weekend, Tech Meetup group, Hackathon, 1 Million Cups chapter or something else not even on our current menu will percolate up.
I’m looking forward to seeing proposals and helping support leaders who are ready to put themselves out there to get something going that helps entrepreneurs and startups.
Whether you’re a startup seeking investment or you see an opportunity to help contribute to building the ecosystem, you can message me through the Babinec.com web site. And consider commenting right on this post below and/or sharing the link with others you know who might have interest.
This is a fun journey with big time impact in helping our best and brightest talent – join us!
Since what we accomplish is often linked to who we meet, first time entrepreneurs are particularly motivated to extend their network for new relationships leading to partners, customers, team members and capital sources to name just a few.
But even with a wish list of possible relationship needs, it’s not practical to jump into every group or event we see or blindly flail about without a plan increasing odds of success in locating and interacting with those we are looking to meet.
That probably begins with figuring out where the richest environments might be – not only with the densest population of our targets, but also connectors that might lead to the high impact sources we’re seeking.
As an example, since most VC’s depend on referrals from trusted sources as their primary source of new deal flow, it’s worth thinking about who supporters are in the ecosystem like the right service providers, angel investors and other referring sources who can be more easily accessed through networks and group events.
High value in meeting new people face to face
A surprising number of millennials I meet seem hesitant to put much time and effort into building their network by regularly pursuing higher volume of face to face interactions with people or groups they don’t yet know.
The comfort of working the keyboard to troll through social networks and existing connections seems more time efficient – to which I respond “Keep doing whatever is working for you – but if you’re not yet finding the people you want help from, maybe it’s time to mix in some traditional methods of how most new relationships get started.”
We know that when we first meet someone face to face, we’re likely to follow social norms with a courteous dialogue that subtly has each person checking the other out. Both parties arrive at their respective conclusions with a lot of intuition and non verbal clues that simply can’t come across in email or an online profile.
With even a brief interaction, we’ll generally know whether we’ve been able to generate the needed spark of interest with whom we’re talking to – thus guiding us towards which of the people we just met will get some follow up attention.
And since some of the strangers we meet turn out to be givers who want to help, the human dynamic of meeting them in person stimulates curiosity and dialogue that may result in offers that would have been very hard to stimulate from a direct “cold call” or digital approach to that same person.
You give before you get
People who haven’t done business in Silicon Valley are generally surprised to hear the ethos of “pay it forward” is what truly powers startups there. The ease at which first time entrepreneurs are able to both find and access so many of the right givers is the essential glue that makes it the most entrepreneur supportive environment on the planet.
And giving is not limited to just those who are already advanced in their professional journey or accomplishment. If you’re the person seeking help, you have a chance to show your stuff and surprise someone by figuring out some small give to a person you just met and don’t know well yet.
Even if it’s just a small nugget of info that is on target with that person, being proactive in giving sets you up for being memorable and perhaps starting a new relationship instead of a forgotten interaction of no value to either party.
Can’t predict what comes downstream
When I peel back the history of some of my most life changing relationships, a surprising number can be traced back to origins from unanticipated creative collisions.
A majority of the initial interactions were with people who in turn introduced me to the high impact investor, partner, customer or team member not present at the event where I met the connector.
Other people on a young team might have roles less dependent on securing high impact external relationships. But for the founder/CEO in an emerging company, expanding the relationship network is a sufficiently high impact activity to justify being an ongoing part of the schedule.
Even though some events and groups won’t pan out as productive exercises, the ones that do will yield results to make all the difference in the journey.
While most of my inbound startup inquiries come from first time entrepreneurs, this one was different. Even though he was still pre-launch, the aspiring entrepreneur is on the founding executive team of a company that went from startup to a successful IPO in six years.
Now with a year of public company executive team experience on top of managing through multi-year hyper growth, his view of the challenges and decision making to build a true enterprise were things I could relate to right away.
He was getting ready to leave the public company and venture off to start a venture where he would be a first time CEO. Plus he was in the enviable position of choosing to self fund or take his pick of investors at the door with Series A checks in hand before he even showed a pitch deck much less form a company.
What was surprisingly refreshing in our conversation were the entrepreneur’s thoughtful questions, and even a degree of humility that I almost never see from someone with that success pedigree.
After discussing the topic that prompted his call, he shifted into asking me about insights I might offer for the chapter 2 journey he was about to embark on. This was kind of fun for me, since sharing with someone who had been through what he had could be done with a lot of shared context so we breezed through some heavy topics quickly.
Imagining if I were in his shoes, three quick highlights came to mind:
1. Take some time off between gigs. Even though his vision for the new startup was a burning ambition, he is coming off six years of continuously running full tilt. Taking the helm to build a startup from scratch is an all consuming endeavor. The opportunity to recharge now, especially with family, might not be coming again for potentially several years or longer. No matter how quick the market might seem to be moving, there is no doubt that opportunity would still be there for him even if he took 6-12 months off now – time that could never be recaptured again.
2. Finish Big means a lot more than liquidity. When you’re in the trenches going through all that’s involved in building a high growth company, it is way too easy to fall into the trap of thinking how great life will be if you exit someday with a big payoff. However, in my own experience of speaking with quite a few other exited entrepreneurs, I’ve found many more of them unsettled with their lot than those who were leading fulfilling lives. Bo Burlingham’s recently published Finish Big – How great entrepreneurs exit their companies on top, covers this phenomenon with such great insight that I am now giving it to every startup I work with as they approach Series A financing. That’s right, putting the lens on what makes a successful exit (beyond financial measures) can guide decision making on influencing the kind of company culture to build and how to set expectations with those around you that you will want to deliver on.
3. The reward is the journey. In the 20 years of my serving as TriNet’s CEO, this became a mantra incorporated into my closing remarks at our quarterly all hands meetings. The thought is often attributed to Steve Jobs and to me embodies belief that reward isn’t measured so much by the imagined big exit, but instead by the little successes experienced by team members at every step we took along the way. No matter how hard we worked in constantly adapting to change, we sought out ways to reap reward from things like crazy ways to make meetings fun, hiring people we enjoyed spending our time with and friendly competitions to do things we could see made a difference for our customers and their employees. Memories of those shared interactions and successes will last a lifetime for me and many others who found intrinsic reward from being part the TriNet journey.
I’ll be watching with interest on how this new startup entrepreneur’s journey unfolds from here. He has the maturity that points to the right stuff. Those getting on his team are likely to benefit in ways they’ve not yet imagined.
With a big chunk of my time devoted to accelerating Upstate NY’s startup ecosystem, I think a lot about how starting new relationships is critical to making a successful startup community.
The ease in which strangers can drop into a place like Silicon Valley and meet the right people is a dynamic that outsiders aspire to, but don’t seem to put much energy towards figuring out in second and third tier markets like ours.
So among other initiatives, I’ve been playing up the importance of building relationship capital when I’m interacting with first time entrepreneurs who are usually pretty light when it comes to the relationship network they need to build a company.
Relationship impact may not be obvious at initial interaction
Any entrepreneur who has built a serious company will have their own stories about key people they met along the way who ended up having a significant impact on their success, yet their initial interaction seemed fortuitous.
In contrast, I’m seeing a lot of first time entrepreneurs focus maniacally on pursuing relationships they perceive will lead to capital, but with too narrow a focus that puts them at risk of overlooking others who might be possible mentors, advisors and referral sources. These are the relationships that eventually lead to capital providers, customers, channel partners or other highly prized relationships vital for a startup’s success.
A person I just met might open one door, many or none but I won’t know what will unfold until a relationship deepens over time. That means planting lots of seeds, nurturing the right first time interactions into relationships – especially with people having a mix of capability and interest in advancing a dialogue.
Relationship Capital Fueled By Being Proactive & Crossing Boundaries
Figuring out who to meet has never been easier. In this transparent world with such readily accessible information about people in business, how hard is it to come with a top 10 list of people that would be good to know, or the intel on who their friends are or where they hang out?
Supplementing a targeted list of people would be organizations/groups and events populated by people likely to include the profile of those having some things in common with your interests.
Again, a bit of research is needed – just don’t fall into the common trap of thinking that the only relevant groups are those somewhere within immediate view such as your university, local area or industry.
Developing high impact relationships are well worth the time to invest in targeting, crossing boundaries to new organizations and even traveling as needed to interact with a group of like minded others to tap into new networks and forge new relationships.
You give before you get
The principle of reciprocity captures the essence of what it takes to turn a chance encounter into the first stages of what could become a productive relationship.
Think about the casual interactions you might have at a reception event. In these settings, the most successful people I know are naturally curious and usually not the ones opening up unless questioned by others. Instead they query you about your interests, often times subtly honing in on the areas where they might possibly be able to help you.
Can you uncover something in your dialogue to offer up (even if at a later time) to that successful person asking you these questions?
Once you know more about the other person, your give might be a relevant article or post you came across, a recommended place or event or best of all – an introduction to someone else or a resource that you’ve figured out would be helpful to who you’re talking with.
Planting lots of seeds and nurturing a whole bunch of recent contacts into productive relationships takes work that most people won’t do. Those who are truly connectors are organized with disciplined contact management and calendaring of follow ups.
In the TriNet world of referral generated sales, we learned to get highly systematic in building processes around keeping our reps constantly identifying and nurturing their top relationships – a foundational element of our building a referral based culture and company.
More recently, that systematic approach to relationship building is incorporated into IntroNet – an app which helps people connect others and track what happens with the introductions they make.
Any one of these relationship development tactics would produce some results in helping meet and come to know more people who could help you.
Put them together and you’ll be on your way towards achieving that next big thing, no matter what that might be.
No one is likely to mistake my hometown area of Upstate’s beautiful Mohawk Valley with the dynamism of Silicon Valley. But those who know me are also aware of my deep commitment to help foster an Upstate wide startup ecosystem – so seeing some meaningful progress close to home is especially motivating for me.
Before I explain this new source of optimism, let me give some Upstate NY geography context. I reside in the Utica/Rome SMSA of about 300,000 persons. An area once heavily industrialized, but now struggling with the gut wrenching changes arising from the region’s inability to adapt from loss of high paying manufacturing jobs and closure of what was once a huge Air Force base in Rome.
Air Force Research Laboratory
Last year I attended a briefing at the Air Force Research Laboratory (AFRL) to hear about plans to commercialize defense research by engaging Upstate college students to help drive the initial commercialization phase.
My expectations coming in were pretty low. After all, the whole model seemed to be grounded as a government led play – something that runs counter to my principles of how to build a startup community. In fact, were not for the urging of my Upstate Venture Connect Board Member John Zogby, I would not have gone to that briefing at all.
My first surprise was that the head of AFRL, Georg Duchak – a former Air Force general, presented a compelling vision that touched on key elements from Brad Feld’s book Startup Communities. A book he not only read, but incorporated themes from as he envisioned how this initiative would unfold.
Ok. That was impressive and it got my attention. But I could still foresee the many roadblocks yet to overcome, not the least of which was to find an entrepreneur capable of leading this charge amidst an alphabet soup of government bureaucracy and to stitch together an outreach to get some of the best and brightest students from around our Upstate region to come and participate.
It’s about the entrepreneur, stupid
The brilliance of George’s choice in successfully recruiting and relocating Mike McCoy as the entrepreneur to lead the effort was so clearly shown this past weekend when the Commercialization Academy’s first graduating cohort of 9 student teams pitched to an auditorium of excited investors, business professionals and startup community supporters.
This was a very professional output that I would rank up there with what we typically see in mature accelerator programs of the big startup hubs like NYC and Boston. All the more amazing when you consider it was comprised of student teams that came from 13 different colleges.
While not all of the student teams finished with a viable product opportunity, there was little doubt that this program just created a whole new crop of highly charged entrepreneurs and startup candidates who will soon populate Upstate’s startup scene.
Live interactions spur other outcomes
There was also a true “wow” effect from the perspective of the nearly 200 Mohawk Valley residents fortunate enough to be in the audience to take part in the Commercialization Academy demo day.
You won’t hear any of those attendees grousing about lack of potential for growth opportunity here Upstate. They saw our future in front of them and suddenly realized we have the assets to start creating real companies that someday generate a lot more jobs than the big box efforts we still hear about from our political leaders.
Another near term outcome from this event is that it has likely been the tipping point for us now to start building a Mohawk Valley seed capital fund so that our successful local entrepreneurs and professionals can join forces by pooling funds that will help get some of these startups into motion.
As UVC has done this already in Albany, Syracuse, Rochester and Buffalo, we have the pattern recognition to know what it will take. It’s exciting to see the Mohawk Valley now arrive to this level of startup ecosystem development.
Community effort begins with individuals willing to step up
Kudos to George Duchak and Mike McCoy for their prescient vision and more importantly, disciplined execution staying true to key Startup Communities principles like being led by entrepreneurs and crossing boundaries to engage others way outside the scope of their own organization.
I am totally jazzed about the fabulous success of this first true hometown effort and am looking forward to doing all I can to help propel the program forward as they become a leader nationwide in defense research commercialization.
For more info on these and other efforts in the Mohawk Valley and Upstate register on the Upstate Venture Connect website at www.UVC.org and/or follow my blog or twitter feed.
As I mentor startup CEOs, one of the most common struggles I see is figuring out the path to develop the right systems, process and talent to drive new sales.
Depending on the nature of the startup’s business, driving new customer acquisition might be online transaction oriented which can be more about inbound marketing and UI/UX. But many others, particularly those with B2B offerings and a higher ticket price, have to rely on sales people to make and close deals.
Creating a sales force from scratch is never a slam dunk. Doing so when your product may be carving out a new market niche adds to the challenge.
CEO WHO DOESN’T KNOW HOW TO SELL
Back in my earliest days of TriNet, I struggled mightily to get our first customers. As nothing was happening, I made the rookie mistake of thinking that since I had no sales experience the solution would be to find someone with a solid sales background to bring on as VP to figure this out.
I wasn’t equipped then to know what qualities were needed for our situation plus the initial TriNet product was so unusual in the market at that time, that I can now say in retrospect the experienced sales guy I ended up hiring was set up for failure the day he arrived.
Being severely undercapitalized, his inability to generate new sales meant I couldn’t keep experimenting and he was cut loose after a few months.
Instead of bringing on a replacement, I invested in getting professional sales training that included hiring a coach who could mentor me on an ongoing basis. One of my luckiest breaks was finding Don France as that coach. He taught me the Sandler Sales methodology and mentored me through all kinds of sales transactions and challenges over the next year.
At the time, fees for that arrangement seemed high. However, it proved to be the best investment I ever made. I embarked on what was to become a transformational journey from being an “HR guy” to a “sales driven CEO” and have never looked back.
FOUNDER/CEOs HAVE A POWERFUL ADVANTAGE IN SELLING
The next five years saw me as the only sales rep for the company. Yet we grew to about 25 other people on the team who were all supported from the volume of new business I was able to bring on from my own selling efforts.
Now I’m not suggesting that in today’s faster moving world that same stretch would make sense for a new tech startup. But I am a passionate believer that if you’re selling a big ticket item the founder has a lot to gain by being out in front of that initial selling effort.
No one is better equipped than the Founder/CEO to relate to prospects with passion and can also come back and direct the service team to make necessary adjustments to the platform or offering so that it lines up with what the market feedback is saying.
LAYING THE FOUNDATION FOR SALES SYSTEMS & PROCESS
Since high ticket sales don’t close by themselves, I was under time pressure to have a tight system and process in order to maximize the number of selling hours I could get with my direct prospect contact.
The professional training and mentoring Don gave me also put me on path to develop structure around organizing that sales system and process. By the time we got to hiring reps 2, 3 and 4 we had a clearly defined system and process that that made a big difference in getting new people up to speed in selling within a reasonable period of time – even if they had no prior experience in our industry.
From those early days, TriNet’s sales systems have continuously evolved with increasing sophistication. My successor CEO Burton Goldfield and team have taken it now to levels we believe are best in class yet still consistent with several aspects of our original approach to sales process.
FIND A COACH – LEARN A SALES SYSTEM
I’ve looked for Don France but been unable to locate him – I would love to thank him for all that he did to help put me on the right track.
These days the guy who I point my startup CEOs to is Jack Daly (www.JackDaly.net). He has a pretty extensive online library but his full day sessions are worth traveling to as he packs a ton of professional sales insight to include both foundational elements of sales systems/process and selecting/managing sales talent.
I’m sure there are many others out there too. Ask a bunch of people you know who have deep sales management experience and find out who they recommend for both sales systems/process and mentoring. Someone local can be an advantage if they’re the right fit.
Readers of this post please respond with comments if you have resources you recommend.
Seems that almost every work day I’m speaking with other entrepreneurs – whether it’s people I’m collaborating with to build Upstate NY’s startup ecosystem or earlier stage entrepreneurs who I might be mentoring to help in decisions they’re making.
These interactions are very fulfilling for me so I’m always looking to add as much value as I can by helping others understand perspectives that shaped my journey in building TriNet.
As part of a keynote address for a large entrepreneur conference, I was asked to touch on what shaped some of the key decisions along the way. That got me thinking about the top 3 or 4 influencers that truly nudged me towards thinking differently.
Since I’m frequently recommending these same resources to others, I’m hoping this post will make it easier to spread the value even further.
Tag Line:Right Sales, Right Service, Right Customers, Right Cost
Impact for Me: With TriNet’s business model very much tied to amassing scale as quickly as possible, the idea of honing in on a narrow vertical market was a counter intuitive strategy at the startup stage. (In fact, for the first five years or so at our industry conferences it was totally baffling to my peers). However, those familiar with the TriNet story are aware that over our first decade we evolved to become best in class serving the very narrow niche of private equity backed emerging tech companies. Robert Hall’s presentation and book helped me figure out why that specific target was the right one for us to focus in on and then how to look at sales, service, customers and cost as integrated decisions instead of separate silos that more typically happens as a company grows.
Impact for Me: While this best seller certainly has influenced lots of leaders, the biggest takeaway that I put into action was developing the structure and process discipline around driving core values through the entire company. Even as TriNet grew far beyond the stage of me and my direct reports doing all the key people decisions (like hiring, firing and rewarding) our institutionalizing processes around driving core values through these decisions has influenced the fabric of the company long after I stepped down as CEO.
Impact for Me: The Great Game of Business (aka The Game) is more than just an inspiring story with clear principles around things like open book management and incentive rewards that build accountability- it is a philosophy of how to run a business so the entire workforce becomes engaged to both think and act as owners. Getting to know Jack Stack and executing these principles has unquestionably been the single most impactful path on the entire TriNet journey.
Tag Line:Proven Systems for Starting Fast, Growing Quickly and Surviving Hard Times
Impact for Me: Like most founder/CEO’s, my biggest personal challenge was evolving my own management style to fit the changing needs of the company. The faster the company grows, the bigger the challenge for the CEO to do things differently – what worked when you had 3 or 4 direct reports and 30 or so employees doesn’t necessarily work when you’re double or triple that size and again is totally different after 10x growth. T. J. Rogers approach to having systems and processes to build accountability was a terrific complement to what we had already started in the Great Game of Business. Some would say that since this was written before the internet age that his descriptions of systems and processes are now dated. While it’s true that today’s cloud based tools and integrated work flow are great enablers in themselves, I still highly recommend this book as a guide for CEOs going through their own development so they can wrap their head around the importance of leading the accountability journey themselves.
Our Syracuse based StartFast venture accelerator just completed our third cohort – graduating six teams at our August 14 Demo Day that featured 250 enthusiastic attendees.
For the third year in a row, ours was the largest gathering of accredited startup investors ever assembled in Upstate NY.
While startup teams and investors are in the Demo Day spotlight, watching the event unfold made me think about the real back story involving hard work and dedicated commitment of both the StartFast staff and our network of mentors who gave so much to propel these teams forward over the 3 months of the StartFast program.
StartFast mentors are volunteers. While some may advance to become an investor in a participating startup, the majority are taking time away from their own businesses and activities to help our fledgling teams without getting any compensation beyond their own satisfaction of making a difference.
This is pay it forward in the spirit of Silicon Valley and something we’re working hard to spread throughout the Upstate region.
Mentoring Comes In Different Flavors
Mentors have varying degrees of involvement, typically driven by finding the right match between the startup’s needs and mentor’s interests.
Some mentors will drop in for a site visit, interview each team and offer insights, possibly capping a visit by making a presentation to the overall cohort.
Others are tapped by Nasir Ali and Chuck Stormon (StartFast Managing Directors) to help fill an identified need for a particular team that is in line the mentor’s background and/or relationship network.
Whether it’s strategy, tactical options to fix a problem or opening up doors to a critical resource – these spot engagement can be very helpful to the startup and not require a big time commitment on the part of the mentor.
An even bigger contribution comes when a mentor evolves into an ongoing advisor role, staying involved in guiding the startup through multiple stages of the program and potentially beyond.
High Impact Mentor
The highest level contribution comes when a mentor believes so passionately in what a startup is doing that they dig in and find ways to help craft and execute some aspect of what the team is trying to achieve that it puts the startup on a different trajectory than the one they were planning at the time they entered StartFast.
Our case study for this involves StartFast alum SwipeToSpin (STS) – an intuitive interface making 3D imaging of objects easy for users to navigate as they examine a product from any angle of their choice while inside a browser.
Entering StartFast, the STS value proposition was aimed for high ticket luxury goods and content oriented web properties where 3D images would have some user appeal.
As with most startups, STS experimented with several product market categories, seeking to find the right segment where the STS solution solved a user problem that customers were ready to pay for.
Soon after some testing started in the automotive sector, STS began interacting much more with StartFast mentor John Max Miller, a serial entrepreneur with several successful exits in the auto sector – a guy knowledgeable about issues from the customer perspective, and also someone with a deep set of industry relationships.
John helped STS understand the need in the market and was active in shaping the STS product for this new target sector. He even personally called upon his dealer relationships and helped close initial sales.
In just a few months, STS’s growth in the auto dealer sector gained faster traction than any of the other verticals the company was marketing to. With further market analysis and the proven speed at which new sales were now closing, it was blindingly obvious that this segment was worth pivoting significant company strategy towards.
That growth spurt in turn raised investor confidence and following Demo Day, STS closed an equity round led by StartFast that included institutional investors.
The company continues its trajectory and is on plan for key milestones. John remains involved as he introduces the company to major partners and other vendors in the space, as well as supporting management in both strategy and execution.
STS is shaping up to be a company with lots of upside potential, creating opportunity for investors, the team and our Upstate startup ecosystem.
All of this made possible because one mentor tuned in, and then didn’t give up in his quest to help. In character of the persistent entrepreneur that he is, John steadily engaged with the STS team helping them navigate through a vertical previously unfamiliar to the team. Not just with strategic input, but the tactical execution of the tasks necessary to get there. All of this required his time and mindshare commitment without expectation of a financial return.
We salute John, STS and all the mentors who helped StartFast become an accelerator program built in the spirit of TechStars by engaging experienced entrepreneurs who give of themselves to help their earlier stage brethren. Interactions like these are the lifeblood of building a true startup ecosystem and it is gratifying to seem them take root and set the example for many others to follow.