I posted on this over at the personal blog, though it really belongs here. But it’s done so here ya go: http://charliecrystle.blogspot.com
http://charliecrystle.blogspot.com/2010/07/bulls-bears-and-pigs.html
I posted on my personal blog about why startups should be very concerned about liquidation preferences. Take a look and come back to comment.
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I’ve posted extensively over at my personal blog here.
I believe in open discussion, I believe in free speech. And I believe that free speech has limits, as does the Supreme Court. That said, I was disappointed yet elated to see LNP take the forums down. Disappointed because the forums could at times be very valuable and a lot of people enjoyed them. Further, there was a compromise, and I think taking them down entirely was an overreaction.
Elated because the people–including kids reading articles–no longer have to see the racist and bigoted comments that characterize so many of the forum threads. That kind of crap poisons the community and brings us all down, and the online community was not moderating itself.
It will be interesting to see the newspaper’s online strategy going forward. Hopefully it includes an online discussion forum and excludes the racism and bigotry.
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CSA means “community supported agriculture”. Lancaster Farm Fresh CSA means fresh organic veggies delivered each week from Lancaster County’s 65 top Amish organic farms!
The quality and variety throughout the growing season is simply amazing. We’re just now finishing some of what we froze over the summer last year–totally worth it.
My wife has managed the CSA program there for about 4 years, and it’s grown significantly. Last year they served 1200 families over a 28-week program.
You, too, can have fresh organic veggies at a very reasonable cost. Just visit the CSA, and sign up to get your fresh organic veggies from a source you can trust!
CSA means “community supported agriculture”. Lancaster Farm Fresh CSA means fresh organic veggies delivered each week from Lancaster County’s 65 top Amish organic farms!
The quality and variety throughout the growing season is simply amazing. We’re just now finishing some of what we froze over the summer last year–totally worth it.
My wife has managed the CSA program there for about 4 years, and it’s grown significantly. Last year they served 1200 families over a 28-week program.
You, too, can have fresh organic veggies at a very reasonable cost. Just visit the CSA, and sign up to get your fresh organic veggies from a source you can trust!
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I really thought I could pop out more updates faster, but it took 4 weeks! All kinds of bug fixes, re-coding, designing, and it just really added up.
Sign up here: http://www.charliesoft.com
Next week I’m hoping to get another update out with more charts for analyzing time, tags, and tasks. And it would help to get the tasks section done.
Why so long?
Part of the issue is that there’s so much cool stuff to do now that I’ve got a solid flow of data to work with. So I try things out, listen to testers, and try some other things out. And I tend to be greedy for new ideas–I really love to investigate what’s possible.
Feature creep. Kind of. Ok, definitely. It’s ok sometimes, but at some point you have to put a stake in the ground, define what the release is going to be, and only work on that. I’ve reached that point (several times, unfortunately).
So try it out, kick me your feedback, and we’ll keep this thing moving. It’s a lot of fun, and even just tightening it up is fun. There’s a real sense of satisfaction to getting it right.
Today was a satisfying day :)
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Well, it’s been a relatively short road but it feels longer. Here’s what I said on my personal blog–you can get to the beta from there.
http://charliecrystle.blogspot.com/2010/03/beta-1-finally.html
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Liquidation preferences have always seemed to be a case of having your cake and eating it too for investors. I’m guessing the original intent was strictly for downside protection. But it’s become a way for investors to guarantee a certain upside–risk mitigation at the expense of common.
Put another way, it’s terms like these that value capital over people. A common example I give when explaining it to incredulous entrepreneurs is this (let me know if I have it right): say you raise $1 million at a $4 million pre, giving a total of $5 million., so 20% to the VC.
Then you exit for $10 million–double, right? So what’s the VC take?
28%.
First million out the door, leaving $9 million, then pro-rata distribution, so 20% of $9 million = $1.8 million, so $2.8 million total, or 28% of the exit. Return of capital is important–I think as an entrepreneur I am obligated to return capital, so I don’t mind the downside preferences—a 1x cap makes sense to me.
Of course a $20 million exit makes the impact of the preference a lot less, but it still values that capital more than the people, which, ironically, are what VCs typically say they value most in a deal.
On options for founders: I have mixed feelings about this and have been on both sides of the argument. As a founder you create the idea, company, revenue, model, value, etc. And you have stock for that.
And then you play a ton of roles getting the company to greater value, for which everyone is compensated through salary and options, except you, where you end up donating your labor for the benefit of everyone else. As you add more people, you get more and more diluted.
And I say suck it up early on.
You get a lot of special treatment as a founder, so don’t nitpick about a couple points of employee options. Not early, anyway. Later on, though, you get past the love stage.
If you’re CEO, you now have tons of liability and new, real responsibilities and obligations that go far beyond the creation and founding of a company. And I think you should get market-average options, and market-average salary if there’s enough revenue and investment, and if you take less than market salary your options should increase with a 20% kicker or so to address their illiquidity.
My biggest regret in the 4 companies I’ve started, funded, and run has nothing to do with ownership, though. It’s that I put in 80 to 100 hour weeks, thinking that I had to do that to make it work, and nearly killed myself doing it. It’s amazing how much time some of us spend obsessing about opportunity while neglecting ourselves.
Options? Screw the options. You’ll get much more out of a life coach, and none of the resentment from employees and investors because you’re dickering over a few points in options on top of your massive stake.
Posted in Fundraising, Startups, Venture Capital, founders | 2 Comments »
First, let me say I always appreciate the courtesy of a phone call, even when it’s disappointing news. I think people deserve the call back. When I don’t want to buy something from someone who calls repeatedly, I call back or email back to let them know they should move on. Courtesy is easy and always good for business. I don’t always get that same courtesy, and I notice. Moving along…
At two of my companies we had sales teams in smile and dial mode. Leads were plentiful from word of mouth, buzz, and partners, so the calls were always to largely qualified leads.
This week (already) I was reminded of how important call volume is for anyone in “sales” mode. Whether you’re a startup exec, a salesperson, or advocate, your success isn’t going to just show up one day–you have to work for it. That means you have to make a certain number of contacts to get results. Same for fundraising for startups–you only need 1 of the 100 VC you’ll talk with to fund you. Hopefully it’s someone in the first 20, saving you the hassle of presenting over and over, but eat your spinach, it’s good for you. (Don’t raise money if you can at all avoid it).
Let’s say you have 400 leads with phone numbers and you need appointments with each person. That’s a lot of phone calls–intimidating. Start calling! Try this for a week: make 10 calls an hour, giving yourself 2 5-minute breaks. After 8 hours, you will have made 80 calls. Only 320 more calls to go–still sounds daunting. But it’s really only 4 more days.
Of course you won’t connect with all of those the first time, so you’ll need to call back, and that takes time. Let’s be generous and say you only have to make 3 calls on average to reach the person. So your 5 days of calling has now extended to 15 days or 3 business weeks, and you’ve made 1500 calls. That’s not easy–it’s work to make that many calls and have crisp enough conversations to land the meeting.
Last night I drove 1.5 hours to and from Harrisburg for a meetup to show some new software, and didn’t take my cell phone. That’s another way of saying my time wasn’t effectively applied–I could have been making calls (to the chagrin of the legislature, which is considering a ban on calls while driving).
For me, I need to get on the phone for about 6 hours each day, every other day, for the next 8 weeks (to March). It’s hard work, but I’m working on building a consulting practice to advice startups, which means I need to get out there. If I had made enough calls prior to today, I would have had several meetings scheduled in Harrisburg instead of just one.
My point is that if you don’t make the calls, you don’t get the results you need. A scenario for you nonprofit and business folks:
80 calls a day
20 connects
1 sale/donation for every 10 connects
= 10% close rate of connects (maybe higher/lower depending on how good the leads are)
= 2 closes per 20 connects
= 2.5% close rate of all calls
= 42 closes per month, based on 21 business days monthly
Your close rate will vary widely depending on what you’re selling. But if you’re selling appointments to learn about a new bill, you’ll get about 80% of your goal. If it’s a $5,000 item for which you get 5% commission, 2.5% of your call volume is about right and you’ll end up with 42 * $250, or $10,500. Not bad at all. TIP: Measure everything. Rate each call. Analyze everything. You’ll improve dramatically over time.
Now you just have to find a $5,000 something and enough qualified leads ;) Get crackin…
Posted in Startup Management | 1 Comment »
One of my investors argued with me that I’d end up with 100% of nothing if I passed on a deal. And I know the argument well.
In that case, it was a bad deal, but it was the only deal, and was something we likely should have done. I didn’t block it but did ask so many questions they tabled the deal. Bad deals are like that–they don’t do the job of convincing everyone it should get done, and then they languish.
With deals, there’s negative dilution and positive dilution. Negative dilution is when you give up a percentage of ownership and get nothing (or worse) for it. Positive dilution is when you give up a percentage and get more than what you gave for it. Employee options, new capital, partnerships, new equipment–every investment is about positive or negative dilution.
When something costs you nothing but brings the possibility of revenue, new markets, brand awareness, and opportunities, you’re nuts to say no. When it costs you nothing, you say yes. But many, many entrepreneurs say no for one reason or another–scarcity mentality, control issues, fear.
And many amazing technologies go unknown and unused, without benefit to the world or to their inventors. I’ve heard about this, read about it, experienced it with Mission Research, and just recently witnessed something in freefall that has no reason to fail and every reason to succeed. Owning 100% of nothing gets you nowhere. Sometimes you need to give to get–a cliche, but meaningful.
But great ideas need at least mediocre execution to thrive. My dad gave all of his kids a framed piece with a quote from Calvin Coolidge–perhaps his only great contribution to the world:
Tenacity, persistence–yes. But openness and trust make a huge difference too. The 100% of Nothing argument is a good one, but don’t ever let someone influence your choices using the fear of losing everything.Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan ‘Press On’ has solved and always will solve the problems of the human race.
You can lose everything and bounce back–that’s why entrepreneurs are so admired. We lose everything, we fight back, we win against the odds, and then some of us lose it again, just to rediscover that tenacity and fight back to win another day. So don’t give up, and don’t give in to the fears.
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