The Post Money Value

Hug Your Kids Tonight

My friend Jon Ehrlich was in India, in the hotel, when it all went down.  His motto to me is always have some wiggle room in your plans.  Amen. The CNN interview is here.

Welcome back, my friend.

An Assistant? In a Start-Up? Well.......

I got a business plan from a guy in Calgary.  We emailed back and forth and I decided that a Webex/call would be a good thing to do.  Howard (not his real name, my brother's actually) has a phone number in his email and says "Contact the office and Ashley, my assistant, will set this up."  Pre-revenue? 6 month old Start-Up?  An assistant?  Hmm, this is going to be points off but I like the basic idea they are pitching so I want to dig in.

So I contact the company and get a hold of Ashley, the assistant.  As I start to ask her about a time to hook up for a call, a bell rings in the background.  As in the bell you hear in a school.

"Uh, Ashley, are you late to class or something?"

"I'm so sorry. I left my watch at home and, well, took the call thinking I'd be done before classes started. I'm sorry."

"No problem at all, Ashley. Just wondering."

"Thanks. [] offered me an opportunity, part-time, to get some work experience with the office tools, administration, etc. They loaned me a laptop and cover my cell phone bill. In return I help these two guys by being their virtual office and assistant. "

Ya gotta love this in an entrepreneurial start-up, boot strap, kinda thing. It makes the company "look bigger" and since they wanted to have this front office facing view to potential customers, a very cost effective way to do it.  Ashley, from the sound of it, was certainly happy with the arrangement.

We live in interesting times.

More for the What Not To Do file

And the hits keep coming. Live from my Inbox:

Dear VC,

I have a very good investment opportunity for an Internet and offline based business in Los Angeles that is going to revolutionize how business is done and caters to sustainability, wellness, and green based businesses with a very good management board in place.  It has already received some funding and is looking for some more.  Please let me know if you'd be interested in seeing the Executive Summary.

Rule one: Don't do this.

Rule two: See rule one.

The B Word

Warning: You are going to hate this post.

Why do start-ups have bonuses in their budgets? What's up with that?  Let's roll back a bit and figure out what we collectively start with.

First, you come to me with a plan. You believe this plan is extraordinary and the idea, product, or service is amazing.  It is the next Google.  Fine. Let's assume I believe all this and not only drink the Kool-Aid but eat the packaging, cups, and pitcher you served it in.  I'm in. You are funded, baby, let's rock.

You've told me in year 1, 500k of revenue but year 2, Katy bar that damn door, good golly Miss Molly, it is 10x in revenue over year 1.  Amazing! So, why are you asking for a bonus if you met these objectives that you set out.

According to Dictionary.com, ‘bonus’ means ‘something given or paid over and above what is due or expected’. Said differently, it’s compensation for extraordinary performance.

By definition, what is “expected” or “due” of venture-backed companies is “extraordinary” growth. The whole idea of taking venture capital and putting it to use is to grow an enterprise well beyond any natural rates of growth. Accordingly, the basic compensation that a management team earns should be to compensate them for that extraordinary growth. Ordinary growth, even good growth, is less than what is due.  And growth, just so we are clear is not always measured in raw revenue so this isn't about a revenue to pay

Enter variable compensation.  This I love doing.  Give me a set of milestones and objectives you think can be done. Let's give you compensation and equity for doing that. Let's even let you share (equity) in the extraordinary growth of the company as you define it.  When you go above and beyond those targets, you can share and share big in my view.

Practically speaking, if the Hockey stick you tell me can happen is $5,000,000 in year two, excellent, let's comp you so you can avoid worrying too much about the home bills (thank you, Austin Hill) and the rest of it in equity and variable compensation when you go way above and beyond. You get a good/big piece when all the shareholders win.

When I point this out to start-ups, pre-revenue companies, etc, lots of people phreak.  

My advice when you are structuring your compensation packages is make them scream you believe. Think about it.  If you take no salary and all stock, you damn sure believe. The other end of that spectrum is all comp, "market rate" pay and bonuses for doing the job.  You will be somewhere on this spectrum one size doesn't fit all.

To me, it's about how much you believe. That was the B word: Believe.  Do you believe?

Okay, flame away but before you do, please read this again, slowly.  There is a larger point about you being committed and believing in the gig; not me making you go on food stamps.  Every situation is different but the beliefs have still gotta be there.

Budget Rental Car: So Close, Yet

Slog after Slog, you begin to become numb to many travel things (like LAX and the absolute shit terminal Air Canada flies out of) as well as starting get really annoyed with trivial things that should just be better.

I use Budget Rental Car so this observation only applies to them.

I'm in the Fastbreak program in an attempt to speed things up.  Make the reservation online, get on the bus, grab a car, yer outta there.  By and large, except for the inconsistent ways you get those keys, it generally works. When you return your car, a nice person with the magic box walks up, scans the bar code, looks at the gas gauge, prints, tears off a receipt and you are gone. You also will get an emailed copy of your receipt if you are in the plan, they have your email address, etc.

Today at San Francisco airport, I delivered my car back and had to wait for another person. So, I had my BlackBerry out, checking the emails.    For grins, I stand there and watch my BB as this guy checks the car in.

Before the print out is even started, the electronic receipt is on my BB.   You know where this is going. 

I ask: "Can I just not get a paper receipt? Just ask me before you waste the paper?"

Answer: "Oh no sir! We have to print it or the system won't work correctly. But if you don't want it, I'll throw it away, we recycle."

Sigh. Waste of paper, waste of a precious few seconds (which add up) in processing, extra machines, process, etc.  And making sure that all the employees are told exactly the wrong thing. The process was done when that email showed up; the Cendent kids got my money. Cendent, to the best of my knowledge still owns Budget.

Opportunity number one: Yo! Cendent. Wake up and save some paper.

Opportunity number two: Attention Worldmate: Add a feature that allows me to forward this (and other) receipts to you, parse it, and make me an expense report I can turn in. See opportunity number three and team up with these guys (Doc-Snap) to do all of this. (Features of the World: Unite)

Opportunity number three: Doc-Snap, ScanR and all you other take pictures of the receipts companies, see above as there are opportunities here.

[Note 1: The "we recycle" snark above, I added.  I'm only pointing this out because the corporate cops at Cendent can look at my rental, figure out who checked me in and spoke with me. I don't want an innocent person going to a Cendent re-education camp on account of me.]

[Note 2: There is likely to be an onslaught of "we do this" emails flying into my inbox. Super, send em, let's talk.  The larger point here we are just note getting it done when it comes to business getting 120% out of technology. We can do better.]

My Bad Timing beats YOUR Bad Timing

It's Air Canada Flight 759 and I'm heading to San Francisco for a Tuesday morning meeting, then off to Newark that night, back in TO Wednesday morning.  That must mean it's time for more business plan reading.

A group of entrepreneurs from Fort Worth, Texas sends in a business plan that essentially is going to "revolutionize the acquisition capabilities of retailers especially in these tough economic times".  Sweet, let's dive in and take a look.

Slide 14 Title: Our Immediate Target Customers/Pilots Pipeline.

On this slide lists 8 big companies with either Pilot or "Round Two Discussions" next to the name.  Well done, guys, well.. errr, hold the phone:

Of the 8 companies on the lists 6 are bankrupt or going out of business (Circuit City, Linens and Things, CompUSA, etc).  Not the best timing, eh?

I looked inside the properties of the Power Point deck and saw the presentation was done 2 1/2 years ago. 

Lesson for you: Update your slides.  [I know. You are insulted that I would even suggest this. Re-read the above. I'm just saying..]

Moving on.

Here's one of the funniest introductions I've gotten in awhile, courtesy of a company in Calgary, Canada.

Dear Rick,

Attached please find the executive summary of [] our gig out here in Calgary.  A couple of points before you dive in.  We can't tell if you are doing the American English or Canadian (Queen's) English thing given the schizophrenic spelling we see in your blog. So, page one is done with Yankee English and page two is Canadian.  We're good either way, just showing a little cross border love.

My kinda guys.

Memo to Seth Godin: They fixed the wrong thing

Some time ago, Seth Godin had a blog post up about Air Canada's in flight entertainment system blowing his ear drums out by not resetting the systems properly between use.

Well, fear not. Those crack engineers inside the depths of Air Canada were hard at work trying to resolve this.  Unfortunately, they got a little side tracked with another more pressing problem.  People had figured out how to skip over the 10 ads prior to any show starting.  Well, that's just unacceptable so that problem was solved!

The first pile of the ads are in one glob with the controls disabled including the volume control.  Now what you have is the volume all the way up, people jerking the ear buds out - the ones you now pay for- pounding on the screen, and scowling until the show comes on.  Pissed off people, ineffective system, and completely broken usability.  Paging CIBC. Nobody is listening to Maria and dreams being fulfilled with here AeroGold card.

Brilliant.

Features of the World: UNITE

As I mentioned a few posts ago, I do get lots of plans and try hard to respond to everyone. On the Saturday flight, I read tons of plans, looked at tons of power point presentations, etc.  Here is an observation.

I have 21 folks wanting to compete with Loopt.  21 plans show Loopt as the major competitor and 21 people point out 21 DIFFERENT things missing from Loopt and why each of these missing features will be the killer feature that blows everybody away, etc, etc.

Good news: Lots of room for improvement and lots of new ideas.

Bad news: 21 companies are not going to get funding on the basis of finding a better/missing feature of another product or service.

The hardest realization for any start-up to deal with is that in many cases that cool software/service doing that amazing thing should be a feature in something else.  Sorry, I know I'm going to get blasted for this but it is true of many offerings which come across my desk.

I've often emailed folks with that feedback.  Here is a small excerpt:

Hi []

Thanks for letting me take a look.  From my perspective, while I appreciate the solution you've laid out, I think it is a feature of something else and not a stand alone business; certainly not one that I could invest in, unfortunately.  I've seen a number of variations on what you've proposed and maybe an interesting approach would be if you teamed up with a few others and create a larger offering which has greater possibility of a fundable company.  If you'd like, I'm happy to introduce you to several of folks....

Rarely does anyone take me up on this. In fact I've never seen this scenario actually result in a company being put together.  That's a shame, in my opinion.  Egos and other issues, I'm sure, play into this.  It just seems to me a waste of good ideas that never actually get full traction.

I know check your ego at the door is probably an anti-entrepreneurial thing but I'm just saying..

Food for thought.

Jimi King and the Power of Social Media

More people than you might think don't actually 'get' this social media thing.  For those out there who want a fairly good/live example, here's one of the best.

At noon (eastern time) on Sunday, a fine fellow named Jimi King does a live Internet only, radio show on www.sky.fm . The direct link to the live show is here.  It's smooth jazz and may not be your taste of you music.  This show, tho, is a perfect window in how to build an audience virally and via social media sites/tools.

Jimi has set up a page on Facebook, has a Facebook group, Skype chats, and a forum on Sky.fm's place.  Here is the secret sauce: He 'talks' to these people in two very important ways. First, he calls out hellos to people who are telling him hello from wherever, talks about the friends coming into Facebook, and interacts with people on Skype, etc.  The interaction between each person on the forums/chat rooms is quite robust.

The second thing he does in talking to the audience is heads up/first shot for tickets to various events of the artists playing on the show. When people ask why not come to whatever city, he invites that person to get some folks together and organize it.

As I was typing this, he called out a answer on how to find the sky.fm group on Facebook.  Then he pointed out that those wanting to go to a show in January could get tickets now by calling a certain number since the venue wasn't up on the jazz club's web site yet.  All of this is going on while Jimi plays music.

His Blog is here. Scroll down and notice the complete lack of geek speak yet the integration of videos, you tube, e-commerce, etc.  All the way many of us would expect somebody to be actually using this technology.

All of us have listened to "DJs" on the radio. Some stations even do a shout out to Internet users from time to time.   You could say Jimi is just doing what DJs have been doing for years with audiences. Probably.

But if you want to point somebody to an excellent example of how all of this tech stuff comes together, send them to Jimi's show on Sundays. 

He is doing it right. Well done.

No, Really, You Just Can't Make This Stuff Up

If it's Saturday, it must mean Air Canada Flight 786 and me.  Perfect time to catch up on some presentations from up coming entrepreneurs.  After all the commentary I and other bloggers have put up about watching what you 'leave in' with respect to your presentations, you'd think the time between receiving these screw ups would get long.  You'd think that and you'd be wrong.

[Special note to Lexington, Kentucky: This did not come from anyone in Lexington or the surrounding states. Just to put your mind at ease. :-) ]

A big Power Point deck shows up along with a fairly interesting opening email.

"Dear rick,

I've been reading your blog since 1998 and have found it really good. I have enclosed a short presentation which I hope you will review and decide to follow up with some questions which can lead to a potential financing.  There are social networks and mobile applications out there but the marriage of the two is still an elusive, gut wrenching, problem with no immediate solution. Until [].  Check out the deck and please get back to me."

Yeah. First clue: Fonts and color.  Folks, save yourself the embarrassment of being so nakedly obvious about the spamming/form letter type email, and just use plain text.  It might get past most of us.  Since I haven't been blogging since 1998, that's another clue, for sure. (There's a VC who's been blogging since 1998?).

So, I'm a plane, wtf, let's open this puppy and take a look.  Lovely. Only SIXTY FIVE (6 and 5) slides. I blast through the first 5 which are of the problem, solution, status, money, team ilk. Okay, at least to the point in the first 5. 

But wait there's more.

Slide six is titled: Audience Dependent Additional Slides

First group past slide six is titled: If stiff ass suits from RBC, TD, or Scotia  [note to non-Canadians: These are three big banks in Canada]

Then there are various slides with screen shots differentiated by the Bank Logos.

[Note: I can categorically verify that at RBC Venture Partners, nobody wears suits except for Kevin on Thursdays when he is in his Speedo explaining liquidation preference waterfalls to the kids at a Toronto Montessori School.] 

Next section says: Only Include when meeting is just with men

Three slides which have screen shots showing technology being useful in, let's us just say, meeting up. One additional slide makes a point about Location based services being useful in hooking up. Think a mobile adult friend finder kinda thing and you'll pretty much have it.

This goes on for 30 plus slides; a divider and then some slides to use.

The best section is the last one entitled various financial models.  Angel, VC, Grant, etc, all have sections and ALL have different numbers, different market size numbers, different objectives, etc. Each section has different people/bio slides. The Angel gets two people all the way up to the VC getting 6 people. The Bio information on the people is different on each slide in terms of what jobs, etc.  The VC gets a full development group in Vietnam for $19k per month. 60 people.

All in all, a fascinating way to pass the time.  Do I need to mention that keeping all these variations in separate decks and mix -n- match on a one off basis is probably better then starting with the full pile and then scaling back?  Especially, if we are going to get, uhhh, creative.

From up here it looks like there's parking at the mall.

More head shaking and a sprinkling of smart stuff

1200 enquires of the last couple of weeks. Some stats for you:

32 from India

813 from North America

4 from Africa (the continent)

22 from Australia/New Zealand (separate countries, I know)

The rest from Europe.

50 or so: "I love your blog"

  - Of those, 2 people specifically called out "amazing posts" and then referenced posts from Brad Feld. Cold, people, really cold. And one guy from Toronto, no less.

3 Business plans the virus checker wents nuts on, bzzzd, sorry thanks for playing.

9 emails telling me that if I didn't respond within 48hrs, they would be "forced" (or "reluctantly driven") to the iFund.  I especially liked the "even tho Apple sucks, I'm forced into this situation by events in the development arena."

12 emails indicating "Jim" suggested they contact me personally.  The RIM CEO couldn't pick me out of a line-up, folks.

20 NDAs attached along with the business plans.  My personal favorite was the NDA in Spanish (except the file name NDA.doc) and the business plan (32 pages) in English.

1 email with: "Steve Jobs has done an amazing thing with these Blackberry devices and my application can continue the drive for total RIM dominance." Now, what's cool about this one was the Steve Jobs, Blackberry and RIM words were all in Bold and different font.  This was from a fine fella in Lexington KY.  Yeah, [DEL].

There were a few rays of hope:

2 people sent me PDFs with brochures and simply said this is what we do and we are looking for financing. Please let us know if we can send additional material.  Smart.

Several sent links to web pages that were about us things, again, if you want more information, please let us know. Smart.

[Note: On of these some will argue it's still shotgun/spammy but it was to the point and they took the time to give me enough information for a fast scan]

Lots of executive summary (one or two page) with the basics.

 

Fun times around the Inbox.

NYC Today & Observations

I know, blogging has been light. I'm doing my part to keep you from getting more and more "cut! slash! burn!" blog posts.  You're welcome.  Anyway, I'm traveling to the big apple, NYC, today.  As is my normal routine, I take the super early train into Newark, NJ.  Then I hop on the commuter train into Penn Station (NYC). From there, subway or bus to wherever I'm going.

I do this for a variety of reasons. First, I'm both cheap and I'm a train phreak. Second, it's a great way to tech watch with the average person.  Either the kids going to school or the business folks schlepping into the city for work.  During these short hauls, I can observe what people are doing with technology.  For example, over the years text messaging has tracked exactly the way it was going in Europe and Asia. Kids first, then people in suits.  There was a gap in text messaging usage in North America which translated into a great opportunity for those that were paying attention to the curve.

These days, MacBook and MacBook Pro boxes are noticeably more prevalent on both the planes and on NJ Transit.  I'm riding on one of the newer trains (think Go Trains, fellow Toronto residents) and people have laptops open. I've counted 25 in the several car walk through and 9 of them are Macs. That's a big number in my view.  6 of the people have wireless broadband sticks (4 were AT&T as I know the device/branding).

About 40% (eyeball guess) of the people I counted had buds in the ears.   While I get the whole iPod/music thing, I'm willing to bet you there is a serious tipping point in all of this where audio books, radio stations, podcasts, etc, are going to cross into serious money mode. By that I mean enough people willing to pay for non-musical content in some form or another.  I know it is popular now, but I'm talking VC stuff.  Sleeping, reading the paper, etc, make up the rest.  Interestingly, a very very small group of people were just looking around.  Why is this important?  Because I continue to be down on (and pass on) all these TV advertising companies pitching systems in busses and trains.

[Note: Audible is advertising all over the subway. go to audible.com/subway and I think you can get a free book]

Kids are playing games on phones, iPods, but not Portable Gaming Systems.  None of these school kids have one that I've seen.  Nothing scientific here rather just an observation with respect to device convergence.

The "take all your personal belongings" continues to be code for take your crap off our train or plane.

As you look at your ideas and think about your potential customers, I have some advice.  Hop on the subway. You'll be amazed at what you'll see.

If you are coming to Start-Up Empire on Thursday, please say hello. The code word is: Rachel. You might win a prize!