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Smart is as smart does

There are two market-facing types of smart.  What I call “Conference” smart and what I call “Customer” smart.

Anyone that’s been in a business leadership position knows or should know the different types of “smart” that people around them bring to the table.  Street smart.  Book smart.  Engineering smart.  Keep your mouth shut smart.  I don’t know what I don’t know smart.  And so on.

I’ve been to more than a few industry conferences – and I’ve been on hundreds of customer calls.  In turn, I get the opportunity to talk to lots and lots of people, asking questions, gauging each of their perspectives, problems, lenses on where they see their business and what opportunities that are important to them. 

Conference smart shows up when people go to lots of conferences.  Speak on panels, and generally hob-nob with other conference elite.  They learn the buzz-words, trendy jargon, what people say is the future and can recite the Industry luminaries (and celebrities) by first name – even better by nickname.  The close cousin to Conference smart is Book smart.  They just don’t like to travel to or don’t have the budget freedom to hit the conference circuit.

Customer smart is more gritty.  Not nearly as glamorous as the Conference smart, and definitely without the cocktail parties and trips to Vegas.  Customer smart typically comes with good sales people, but can also come from product leaders, marketeers and other externally-driven people that are interested in who’s buying what, why, and how.

Customer smart trumps Conference smart.  Both however are necessary if you want to be successful - and its important to combine the two when it comes to strategy and longer-range planning.  As my old boss used to say: “when in doubt, make a sales call”.

Smart people can ratfuck you if you’re not careful

Good intentions. Sage advice. Clever insights.  All good and worthy goals of a conversation with a smart person, a successful person, an influential person.  The problem lies in the clarity of what you want out of it and your perspective on the situation or issue.  Smart people want (desperately) to add value, show their intellect, solve a problem, and have you come away better for having spent time with them. Its human nature to want to be liked and smartness is a likeable asset.

1. Career advice

Who hasn’t asked someone for career advice?  We’ve all done it, and given the field I’ve chosen to work in, likely I’ll be seeking it again at some point.  The filter I learned early on was that most people give the advice to do what they did to get them where they are.  Caveat: I typically don’t seek advice from people that haven’t been successful in one way shape or form.

The advice goes like this: If you want to be a fill in the blank.  The advice you get is that the best way to get there is through sales, or marketing, or engineering, or being a ‘generalist’, or goofing off in Europe, or going to grad school, or whatever the background of the person giving the advice is/was that got them to their success.  Its not an intentional ratfuck, but its all too common and is nearly useless to the individual getting the advice.  Unless you too believe that dropping out of Harvard and starting a social networking site is the path to greatness.

In my mind great career advice starts with an understanding of what the advice getter’s background is, where they’ve had real success and real failure, and what their ultimate goal and desires are.

2. Board of Directors

I’ve been on both sides of this one a bunch.  You get a group of (by definition) smart people around a table to “direct” and advise, and keep on the straight and narrow a bunch of (hopefully) smart executives.  The board folks some to meetings and spend quality time with their peers (other investors, former executives, industry experts) once a month and, being human, they want to be seen as smart value-adding participants.

The potential to ratfuck you starts here with the well intentioned, but picks up speed with the their individual level of under-informededness, and achieves escape velocity if their ego is sensitive.  Unless one is plugged in to the market, major business happenings, and other near day-to-day operations then the value you’re adding could be the wrong value to the directees.  The trick on both sides is to gauge the level of direction needed and appropriate as weighed against the width of understanding the situation – of both the director as well as the directees.  Not an easy thing to do!

Some of the best board members I’ve ever had the pleasure to work with don’t talk a lot, but when they do its usually a question that seems to split atoms with its simplicity and directness to the essences of a particular issue.

3. Advisor or Mentor

This is the toughest to spot and the one most likely to really ratfuck you if you’re not careful.  Why? Because more often than not a close advisor or mentor develops a personal or emotional relationship with the advisee.  The ratfucking is unintentional, but no less wrong.  It comes from giving advice that has too much defense for the advisee and too little perspective of the bigger picture.  I’ve experienced this one and the only thing I can reflect on in retrospect is that the advice was too much exactly what I wanted to hear.  Bad decisions result, started in motion by the best intentions.

Punchline:

Great advice is really had to come by.  Most smart people aren’t sage advice givers.  If you find one that likes you, takes the time to really understand you, and tells you things that you don’t like or want to hear – but in retrospect were the right things you needed to hear – hold onto that advisor like gold.

Its all ball bearings - and it starts with a conversation

Its amazing to me what power a simple conversation has.  Conversations can build an incredibly powerful company culture, Conversations can lead to life-changing decisions.  Conversations can turn into fist fights.  Conversations can make your sales number for the year.

Its pretty simple when you think about it.  It all starts with a conversation.  The first time I really heard this was from John Dragoon (CMO at Novell).  John is one of those great presenters that can stand up on a stage in front of 1000 people and give a kickass presentation with nothing but slides with pictures and no words.  You come away remembering exactly what he said, what the point was, and what you can take away.  It feels like a conversation, I think, because he makes a connection with the audience that is authentic.

I read a lot, and recently a lot of that reading has been to understand the industry perspectives and trends as they relate to digital advertising, social content, and media.  As I write this, I'm attending the OMMA Global conference in NYC.  Much of the talk here is about the scarcity of attention and the need to engage in the conversation.  Conversations and authenticity matter in marketing and sales and in running a company.  Even if a conversation is brief, as long as its authentic and honest, that works for me.

What its not:

Its not a conversation if no one participates.  Check your tweet views, blog comments, or bit.ly stats if you want third party confirmation.  Now for those of you with tons of the above: filter out your groupies and then look again.

Wasted conversations are like the plague.  Improve actors and sales people know this better than anyone.  Ditto for conversations that have a contrarian participant being that way just to be contrarian.  Wasted time and energy sucks.

What it should be:

An opportunity.  Every interaction is a chance to have a real conversation.  Sometimes they're short (messaging service).

The VC audience

Understanding your audience as anyone who’s in sales, marketing, or speaks frequently will attest is probably the single largest factor when preparing for and then having success.  Its really no different when it comes to understanding and raising money from venture capitalists.  In fact, its probably one of the most important (and overlooked) things you can screw up. I’ve been thinking about this lately as I talk with fellow entrepreneurs who are looking for investment capital and want advice or opinions on who they should talk to and what their best line of attack should be.

In my experience, no matter how a VC gets onto the career path to partner, they tend to always gravitate into 1 of 3 types of lead investment criteria.  I think this understanding is generally not well understood by companies seeking to raise capital.  Understanding the primary drivers of your audience results in less time wasted and less frustration for both.

1. The Market or Theme-driven investor

At Lijit, our primary lead investor, Foundry Group, falls squarely into this category.  These investors seek out a major market theme and then learn everything there is to know about it.  They are connectors, filters, and learners.  They meet with everyone that covers, invests in, or tries to build a company in their particular focal area.  If they’re right about the market and they do their job right of meeting everyone and looking at everything, then they have an obvious advantage over other investors pursuing the same market – and – they give their portfolio companies a huge boost with connections, partnerships, business development assistance, economic modeling, etc.

2. The People-driven investor

We also have one of these as a lead at Lijit, Boulder Ventures.  This type of investor bets primarily on entrepreneurs that have track records of demonstrable success.  Over time, they form a “stable” of these entrepreneurs.  Tracking, following, keeping in contact with people they want to back.  They make good and focused use of their EIRs to start something and then they invest in that something.  Oftentimes these investors will pass on a deal that has what could be phenomenal market potential, simply because they don’t like or don’t have any experience with the management team.  Conversely, they will take on more market risk with a known and trusted management team with the driving belief being that the team will figure it out and create success.

3. The financial-driven investor

More often than not this group comes from investment banking or other professional investment backgrounds.  They look for deals where they can apply some sort of financial leverage as the leading criteria for weighing whether or not to do a deal. The portfolios of these investors have a more private-equity look and feel.  Portfolio companies that are capital intensive businesses, service driven businesses, roll-ups, and the like might also be there.  Down-rounds are opportunities to consolidate positions, and creative use of leverage is common in their deals.

Obviously the successful venture investors apply all 3 of the above when making an investment decision, but understanding the primary criteria of your audience will make both sides lives easier and more productive.

Admit One.

Step right up.  Get your one-way ticket to ride the ride.

At the close of every quarter we do a review with the entire management team.  Typically these meetings are a chance for everyone to share their successes, how they or their team performed against their goals and get collaborative feedback on what did and didn’t work.  Its also an opportunity to set goals and discuss tactics for the upcoming quarter.  In general I think everyone gets a lot out of it and its a great level-set for where we are as a business.

At this last review we started off with a presentation called: “Ticket to Ride”.

My thesis was simple:

1. You each have a ticket.

2. The ride is going to be up – down – and definitely twisty. 

3. It will be really fun and possibly really scary at times.

4. It may make you light-headed, queasy, disoriented, and possibly you might even puke all over yourself.

5. You will not exit the ride the same as you entered the ride.

Punchline: you have the choice whether or not to take the ride. 

But.. if you go through the turnstile, understand that there will be too much to do, in too little time, with not enough resources.  We’re going to do things that we’ve not done before and in ways that we don’t yet know how exactly we’re going to do them.  Some of you might not make it out alive.  Those that do, will, at a minimum, never be the same again…

Everyone on our team grabbed their ticket.

Would you?

Venture Capital + Federal Government = Sucks

I wrote a quick blog post awhile back after Thomas Friedman’s op-ed in the Wall St. Journal.  Mr. Friedman essentially said that if government really wanted to spur innovation and progress, that we (the royal “we”) should be emulating the venture capital model of a small group of knowledgeable investors making strategic equity investments in promising new start-ups that are executing on innovative and disruptive ideas.  I still like the line of thinking.  I’m not passing judgment on the how or who, I just like the idea.

Today in the PEHub daily newsletter, Dan Primack takes a swing at a Federally backed VC fund-of-funds.  Take a minute to read the article (and the flow chart).

This is where I get sideways with the VC + Government idea.  My experience with the prior wave of SBA-backed VC funds is nearly universally bad.  To me, this was a way for fledgling VCs that couldn’t raise institutional capital, to lever up their individual investors commitments and get them a “big boy” fund.  This is bad on several levels and in nearly all cases I’m familiar with produced a flop for the individuals, the government, and the companies.

Mainly, I think the bar that VCs have to hurdle in order to raise an institutional fund is there for a reason.  It separates the wheat from the chaff in a way that no other model currently does.  It forces the team to have certain performance characteristics, have a sound strategy, and it gets them the kind of commitment that doesn’t balk when markets fluctuate as the always do.  Its a basic check and balance to ensure that only the best survive and that the rewards accrue to the consistent top performers.  Isn’t that what operating and executing in the high-velocity world of venture capital and disruptive innovation is all about?

The creation of a Federal fund-of-funds will obviously push a whole bunch of capital flows into alternative investments.  This will result in a spike of investment and startup activity some of which will be good – and of course some of which will be bad. The rule of unintended consequences suggests that most of this will flow to mediocre VCs and mediocre startups while at the same time hamstringing the companies and investment firms that truly have innovative and disruptive ideas.  A classic example of where the ideals and reality part ways.

Founders make the best salespeople

People that have known me for any length of time have heard me say this more than once.  I still believe it to be the case, although recently I’ve evolved my thinking to include the ‘owners’ of a business.

The simple reason  for my original contention is that a founder of a company has been there since the beginning.  They’ve seen all the gyrations, been intimately involved in building the product or service, sold the first few customers, answered the investors questions, taken on heaps of constructive and critical feedback, and described what they do (or intend to do) at countless social events.  Pile on top of all that: they wouldn’t be founders if they didn’t have a passion that ran far deeper and more animalistic than anyone else around the table.

Like I said, recently, I’ve evolved my thinking a bit on this.  I now include people who truly “own” the business.  By this I mean those people that posses the ownership gene.

This set of people develops a sense of the company’s history regardless of how long they’ve been there, they fearlessly try and try again to describe what it is the company does at each and every family/social/cocktail/sporting event, they roll up their sleeves and get involved in challenges beyond their job scope and description, they think about new ways to expand, increase, grow and generally go faster everyday.  Every business needs a team of people like this if they hope to succeed.  People that have an insatiable need to talk to end users, prospects, skeptics, and basically anyone who will take the time to listen and give constructive feedback.  They use every opportunity to talk passionately about what they’re doing, where they fit amongst the competition, and why their product or service is more awesome than the other guy’s.

Once these people truly understand, are deeply passionate about, and can describe the company’s place and position in a holistic business sense, they then become the best salespeople in the company.

Reducing ‘value’ to an algorithm

Interesting article in the MIT Technology Review about measuring the value of a company (startup) by measuring buzz metrics (Twitter activity, Techcrunch mentions, Blog posts, etc.).  Similar to the YouNoodle or KillerStartup goal of predicting a companies value and ability to raise capital based on the historical biographies of the management/founders.

All of this is complete and utter bullshit.

In the article Feld has a quote that hits the mark: "factors like this dramatically oversimplify the drivers of success (and failure) in entrepreneurial ventures.".

Also in the article is a paragraph quoting Josh Lerner: he has published research showing that an entrepreneur's second startup has slightly better odds of succeeding than her first, and that having one successful startup makes a second startup more likely to succeed. "That suggests there are definitely patterns out there that work," Lerner says. "I'm sure if you were really to punch the data, you'd find there were many other patterns."    This statement on the surface seems to suggest that indeed there are data patters that point to a positive result for YouNoodle.  That unfortunately is at best a weak linkage, and at most purposefully misleading.

The issue I have is that the article and the stance by both the popularity and valuation algorithms is that they completely miss the point of how value is created in ANY company, startups, or otherwise.  I’m actually amazed that MIT paid any real attention to it.  I’d assume that The Onion would be a better source to cover the news on this one.  Not my line, but one I like is Peter Drucker’s: “the purpose of any company is to create a customer”.

Value isn’t created by buzz or by the ability of a founder or manager to raise capital, its created by customers parting with their money/resources because what you have to offer is more valuable than their money/resources.

Back to the article’s usage of Lerner’s research: if you extrapolate that a 2nd time team is statistically more successful than a 1st time team.. then why does the 3rd time team bump directly into the Experience Trap I wrote about a few days ago and decline in their ability to succeed and create value?

Data: who’s your daddy?

A pullback, slowdown, recession or whatever you want to call it, often exposes big opportunities for people and companies that are wise to the bigger picture.  This is exactly what I think is going to happen in the world of online advertising data.

The ad networks figured this out a while ago.  As did the behavioral targeting firms.  The ‘big guys’, Yahoo, Google and Microsoft all own ad networks and behavioral targeting technologies, so by definition, they’ve also sort of figured it out if not implicitly.

What I mean is that online advertising whether its search, display, video, pop-over, pop-under, affiliate, or whatever essentially is a commodity.  The real and tangible value resides in the data (and one could argue the creative).  This data-value contention is what will eventually separate winners from losers and in the process cause all sort of interesting havoc.

My premise is that most online publishers are fickle.  So are the brands.  They seek to get the best performance, period.  To publishers that means quality advertising that generates them good returns on their investment in publishing and engaging readers.  To the advertisers, that means engagement with their brand in a way that (eventually) generates sales.

The trick here is that understanding the performance of what works, what doesn’t, why/why not, and how to improve is the critical component.  The creative process of course has a huge roll to play here, but I think that roll will always accrue to those that are truly creative.  The data piece of this puzzle is much more up for grabs.

Think of it this way:  An ad agency works on a campaign for Nike, they run it across many types of online media.  Its either successful or not.  Who then owns the data about the efficacy?  The agency? The media buying firm? The ad networks? The ‘big guys’?  What if Google decides to take that data and help Adidas?

The fantastic thing about online advertising is that nearly everything can be instrumented, measured, analyzed, experimented-with, tuned and tweaked.  There is a transparency that makes it a compelling place for advertisers and consumers to connect like never before.  The real battle that will wage shortly is behind the scenes and it will be fascinating to watch it play out.

The ‘heads-down’ challenge

For over 14 months now I’ve been working like a banshee at Lijit.  We’ve made a ton of real progress, grown the network of publishers exponentially, and built an entire Ad serving platform.  Sometimes its hard to gauge all that progress because I’m so damn close to everything.

Yesterday, we brought in a handful of thoughtful, smart, and experienced publishers from our network.  We took them through the story, what we’ve been building this past year, and what is on the roadmap for 2009.

This morning Louis Gray wrote a fantastic post that really captured the essence of what we’re doing.  I’m on one hand fired up that he not only ‘got it’ but also was able to articulate our value proposition so clearly.  The disappointing thing is that I realized we’ve done ourselves the disservice of not effectively getting our message and progress out to a wider audience. 

It’s understandable that being so heads-down creates a lack of attention to the external marketing of our value.  The good news is that we can fix that.  We just need to pay more attention to it, and get on that shit! Thanks guys for pointing it out.