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They Do Listen!

Last week I was asked by my buddy Jack Porter of Forward Innovations to speak at one of his Entrepreneur Boot Camps.  It was a fireside chat format and I got to do a lot of what I like to do best: talk.  I told the room of mostly young tech entrepreneurs a lot of war stories and gave lots of advice.  One of the entrepreneurs was kind enough to email me back with the following email:

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Hey Jim –

Just wanted to say thanks for the time you spent with us at the Boot Camp. Your practical and candid advice really resonated with me, especially as a first-timer who is new to all of this. Thanks for sharing your successes and your failures, and for taking the time to invest in us. I got a lot out of what you shared, especially:

  • don’t time the market. if you have an idea…go
  • burn rate is everything. watch it and learn to be honest with yourself. you CAN see it coming
  • get VCs and investors to agree to the lowest possible projections. they measure success based on a plan
  • VCs will ask you what you suck at. have an answer
  • don’t hire from the industry you’re trying to disrupt
  • tell your “A” players: “If you ever think about leaving, give me a chance to make it right first.”
  • in acquisitions, you MUST be ambivalent

There’s a lot more, but I wanted to make it clear that the time you spent with us, at least in my case, was worth it.

——————

Must admit that it feels really good to get an email like this – on a couple of levels.  Most gratifying is that you realize people really do listen.  Most of the successful entrepreneurs I know spend a fair bit of time “giving back”.  Emails like this make it worth it.

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DNA Is Hard To Change

I wrote this post as Blog Post #1 for InfoArmy:

After we sold Jigsaw I had a year at Salesforce to think about what I did right and what I did wrong as CEO.  One of the things I did wrong was not get a design and deliverability framework in place from the very beginning.  I’m not going to be too hard on myself because I was a first-time CEO. Frankly, I didn’t know what the hell I was doing. I had come up through the ranks as a VP of Sales and I had no clue how to build a great product. We raised $750K in December 2003 and had to have a beta product out by May 15, 2004. We got it out – but it wasn’t pretty.  Worse, I was a feature junkie.  My technical team knew that they better have a bunch of bright shiny new features for every release or I wasn’t going to be pleased. For the first three years of jigsaw’s life I tried to put as many ornaments on the Christmas Tree as possible.

Then I got religion. It came in the form of my good friend Raj Kapoor, a VC at Mayfield Fund. Prior to being a VC Raj was founder and CEO of Snapfish. Raj and I had lunch one day and I explained to him that I wasn’t satisfied with the quality of our product.  After asking me a few questions he made me understand the nasty downside of feature addiction. (Note: several of my employees had tried to tell me this previously but I didn’t listen!)

Raj went on to explain that they used a design framework at Snapfish. It was called DIFFET.

D – Dynamic
I – Inviting
F – Fun
F – Fast
E – Engaging
T – Trustworthy

Every employee at Snapfish had the ability to stop the presses by saying that what they were doing did not pass the DIFFET test.  For me, “Fast” was the most eye-opening. Raj explained to me that speed was a feature (Duh!).  He explained that having a fast website solved a bunch of downstream problems for Snapfish. Companies like Google won largely because of speed. He also pointed out that I would need to celebrate and reward increases in speed and performance as much as I did new features.

All fired up I went back to Jigsaw, called my executive team in my office, and told them about my new religion. To their credit none of them actually fell on the floor laughing. Undeterred I worked with my team to put together a Jigsaw DIFFET statement.  We called ours SOFTEC.

S – Simple
O – Open
F – Fast
T – Transparent
E – Engaging
C – Collaborative

All our problems were solved right? Wrong.  Even though I started preaching simplicity and speed we found it very difficult to change the DNA of our company (and especially my own mindset as CEO).  Put another way: we found it far more difficult to take ornaments off the Christmas Tree than it was to put them on. Making things simple and fast takes real time and effort!  Also, our engineers were trained to deliver maximum features.  It was very difficult to turn the ship around.  I still wanted both speed AND new features for Jigsaw. I couldn’t stomach the thought of any period of time going by without new features.  In other words, I talked the talk but I didn’t walk the walk. Luckily, when we created Jigsaw Data Fusion (our Data-as-a-Service product) we used the SOFTEC principles. It was simple and fast and ultimately led to our $175 million acquisition by Salesforce.  I ultimately got religion but it took creating a whole new product to do it.

Moral of the story: when starting a company get your design and deliverability guidelines in place before you even start. Have them guide everything you do – not just your product. Get this DNA set early as it is very difficult to change later.

Next post: InfoArmy’s design and deliverability guidelines – QPSS.

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Waiting for “Superman”

I finally watched “Waiting for “Superman” a couple of nights ago.  If you haven’t seen the movie I would recommend you watch it before reading the rest of this post.  It is a must see if you care at all about education.

The movie really spoke to me as a long time supporter of School Choice and did a great job explaining exactly what is wrong with public education.  I especially loved how the movie eviscerated the teacher’s unions.  Over and over the movie showed video of self-serving teachers union officials and did a voice-over with the statement: “We know who represents the teachers.  Who represents the students?”.  It was great.

Especially moving (in an incredibly sad way) was seeing the faces of kids and parents who pin their hopes and dreams on the slim chance of getting into a Charter School – and not getting accepted.  Tears were definitely streaming down my face.

The movie was flawed in only one way.  It does a great job outlining the problems but does little to propose solutions.  Granted, part of the process of getting to a solution is understanding the problem.  The purpose of this post is to propose a solution.

The movie is about Charter Schools.  More specifically, the movie shows how Charter Schools can do amazing things when not constrained by bureaucracy.   Charter schools can hire/fire their own teachers, set their own curriculum, and set their own rules.  But…. they are still dependent on school boards and politicians for their money, and in most states they must still “teach to the test“.

I submit that Charter Schools are a giant step in the right direction, but are really only a half step toward the real solution.  The full and proper step would be to get the government (and its bloated bureaucracy) out of the way and implement what I call Publicly Funded School Choice.  By applying free market principals to primary and secondary education (like we do to almost every other industry in America) I believe we would quickly propel our lagging system to the very forefront of global education innovation.  More importantly, every student would get a better education than they currently get today.

American Universities are widely considered to be the best in the world  Why?  Because our University system is almost a free market.  Universities have far more ability to hire/fire teachers and students, set their own curriculum and rules, and set prices that allow them to provide quality products at competitive prices.  There is something for everyone in our university system because these schools specialize.  The market decides what schools start, succeed, and fail – not politicians and teachers unions.

I don’t get it.  Why don’t we apply these same free market principals to primary/secondary education?

The solution for making our schools great is to give every kid a voucher and let the market do its magic.  True, not every kid is going to get into Harvard.  But the good news is that a system of school choice can’t be worse than the system that exists today.  Publicly Funded School Choice will will result in public schools eventually being replaced by universal private education.  Public schools, with their political shackles, just won’t be able to compete with agile private businesses.  Imagine a world were every kid goes to private school – not just the rich or the lucky. I believe we will be truly and utterly amazed at what innovation and greatness we will see in our schools if a free market is allowed to flourish.

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Small Business Summit 2011

I’m on Virgin America (it still rocks) back to SFO from NYC.  I spoke at the Small Business Summit 2011 yesterday and wanted to pass on some thoughts.

First, Ramon Ray, the conference organizer is an insanely great guy.  I’ve known him for years as he has written and blogged about Jigsaw kindly many times.  When he asked me to speak a year ago I readily agreed.  He and his partner, Marian Banker, did a fantastic job with the conference and it was very well organized.  Ramon’s limitless energy and enthusiasm permeated the whole room and infected everyone there.

There were several hundred small business owners and start-up entrepreneurs in the audience.  I spoke for 30 minutes and basically told the Jigsaw story and gave them some lessons learned.  After I was done Ramon had six volunteers come up to the front for an impromptu small business clinic.  They had to present a quick business problem they were having trouble with and I had to give them a quick answer/advice.  At first I was thinking “Great, I have to trash people’s ideas in front of a big audience!”.  But, it was fun.  Ramon knows what he’s doing!

I got a lot of questions after, mostly from those in the audience that have a burgeoning technical start-up or are trying to get one off the ground.  You can view the deck I presented here.

General observations:

  • Software/Internet entrepreneurship thrives in NYC. A LOT of very young people with great attitudes and the clear willingness to work their asses off for no pay in order to realize their dreams.
  • A surprisingly high percentage of these people were women.  Maybe it was the audience, but it feels like NYC has a higher percentage of women starting up than the Silicon Valley.
  • Many questions on how/when/why to raise money from VCs.  Compared to the Silicon Valley they seem far more wary about giving up equity.  Many seemed to distrust VCs.  I got so many questions on this subject I decided to write down my advice on fundraising and you can read it here.
  • Many questions on how to turn their service into a product.  (People who do custom work and want to convert the result into a repeatable sale).  My belief is that this is very hard to do.  The DNA of a company founded to do custom work is very different from a laser focused product company.  Plus, it is very hard not to chase revenue for other custom projects that come up when you have bills to pay.  Entrepreneurs think they can do both, and I don’t think they can very often.  To do this takes discipline!
  • I was reminded again the difference between styles on the East Coast vs. the West Coast.  New Yorkers are far more direct and blunt.  I like it!

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GM Bailout Costs Taxpayers $7B

Executive Overview:

  • Bailing out GM has cost taxpayers $7B in realized loss and $19B in unrealized loss
  • GM is a zombie company that should have been allowed to die and rise again
  • Winners: GM’s employees and pensioners, vote-buying politicians
  • Losers: taxpayers, GM’s future

Full Post:

When GM was bailed out during the financial crisis, first by Bush, and then by Obama, I was disgusted.  GM is a company that is fatally structured and needed to die in order to be reborn again in a form that would allow it to succeed.  As sorry as I feel for the employees of GM who would have lost their jobs, and the pensioners who would have lost all or part of their hard-earned retirements, a bankruptcy needed to happen.  The debt and long-term obligations aren’t sustainable – then or now.  GM can’t be competitive with these fatal anchors around its neck.   Without restructuring this ship will eventually sink.

All of this got lost in the haze of  the GM IPO.   President Obama made it sound like a victory for taxpayers, and I’m betting a lot of people believe the spin.   I knew the GM bailout would be costly, I just didn’t know how much.  One of the smartest economists I know, Jim Anderson from Silicon Valley Bank,  did a great post on exactly how much: $7B in real loss and $19B in unrealized loss.

Let’s face it – the bail out was nothing short of buying votes (by both parties).   The bailout was bad for GM as a business and bad for taxpayers.  The winners were GM employees and pensioners, and the politicians who bought votes with taxpayer money.  (Note: the $7B hard loss equates to $33,493 for each of GMs 209,000 employees).

GM is a zombie company now – hamstrung by the UAW, pensioners, debt and partial government ownership.  It won’t be able to make the hard decisions necessary for long-term success because it has too many constituents.   It will never be competitive in today’s competitive automotive industry until it sheds its fatal overhead.  Letting GM go into bankruptcy would have been excruciatingly painful for GM’s employees and pensioners, but it would have given the company a chance to survive and employ generations of future automakers.  What will happen now is a slow death by strangulation, and very likely a series of government bailouts to soften the landing of the pensioners and employees who will most certainly get hosed.

The solution is simple but painful: let the zombie die the next time it becomes insolvent, deal with the political pain, and hope the company can rise again by regaining some of its once great innovative mojo.

There is only one industry I think the government should ever consider bailing out – banks.  I will discuss this in a future post.

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Vail is Fun!

Right after Jigsaw got bought I got a call from a private equity firm out of Chicago called GTCR.  I had never heard of them but took the meeting on instinct.  I have found it is a bad idea to blow off money guys as you never know when you’re going to need funding.

Phil Canfield, the Managing Director of GTCR, and one of his partners Mark Anderson came by to see me at the Jigsaw offices.  I could see right away that they were good guys.  Phil asked me to tell him my “story”, and when he found out that I used to be owner/operator of a ski area (Lookout Pass), he got all excited.  He told me he had a little place in Vail and has a gathering of CEOs there every winter.  He invited me to go.  Of course, I accepted on the spot.

I started getting emails from Phil’s assistant a couple of months before the trip and it looked like there were going to be about eight people going.  There weren’t any hotel instructions and I started getting nervous.  Specifically, I’m at a point in my life where spooning a fellow CEO in a beer-stained double bed just isn’t my thing.  About a week before the trip I chatted with a VC friend and told him about the trip.  He told me GTCR is a serious, serious player in the private equity space.  He even knew the initials of the four guys who make up GTCR.  This calmed my fears about the accommodations and off to Vail I went.

So, I show up at Phil’s “little” ski house.  This wasn’t just the nicest ski house I’ve ever been in.  It might have been the nicest house I’ve ever been in.  It was HUGE, literally right on the slopes, and was absolutely cool in every possible way.  My favorite was the “Ready Room”.  This room was for getting all your gear on before having to walk a whole twenty feet out to the slopes.  The room had a bench full of ski stations – each with its own built in boot warmers.  Yes, I said “built in boot warmers”.  If this doesn’t impress you then I got nothin’ else.

We had a fantastic two days of skiing.  Phil hired two private instructors to give us our own personal tour of Vail and we cranked out at least 25K of vert a day.  It was sick and wrong in every possible way.  The only real inconvenience was that it was cold.  I’m talking minus eight when we first got out on the slopes at 8:30 in the morning.  Luckily it warmed up – especially when Phil had us drop into his private lunch club at mid-mountain for what was certainly the schmanciest ski meal I’ve ever eaten.

Speaking of food, Phil had a personal chef named Michelle cook us all our meals at his house.  The food, wine and service were outstanding.  Michelle is engaged to be married and her fiance is one lucky (and soon to be fat) dude.  That woman can cook.  Phil would sneak down to his wine cellar on regular occasions and bring back a bottle even more spectacular than the last.  Phil got concerned when I informed him that I would be moving in permanently.

Phil gave us a complete tour of the house on the last day.  Most impressive was the “server room” that ran the house.  He has more rackspace and computing power running that house than we had for the entire Jigsaw operation during our first three years in business.  This is what happens when a gadget geek makes too much money.

But seriously, Phil and his two partners who also went on the trip (Mark Anderson and Craig Bondy), were fantastic hosts.  And I’m not just saying this because they took me skiing.  Maybe it has something to do with being from the Midwest, but these guys were just plain old good- time, low-key, funny-ass dudes.  I also have a feeling they’re pretty good businessmen and great partners to CEOs.  The other CEOs were also really great guys but I can’t mention their names because they’re all under indictment (kidding).

I thoroughly enjoyed myself and send a big shout-out and thank you to the boys at GTCR.  They rule.

Note: I also published this as a page in my Travel section.

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Third CODiE!

I’m in the air on Virgin America flying back to SFO from NYC.   I was in NYC  for the CODiE awards.  It was thrilling to win Jigsaw’s third CODiE on Tuesday night.   We won Best Online Business Directory and Sales Leads Service.   I think winning a CODiE is the best way to fire up a start-up’s technical team (other than an IPO).  Our tech team is really psyched – and I’m really proud of them.

I was asked to speak on a panel hosted by Henry Blodgett, CEO and Editor-in-Chief of BusinessInsider.com (Note: Henry is a great speaker and his Business  Insider kicks the dog doo out of TechCrunch.   I’m not just  saying this because Arrington and I are such “good” buddies.  Check it out and decide for yourself).  The panel was titled Information Wants to be Expensive.  Three companies that were identified as disrupting their industries were interviewed by Henry.  Here are the main points that I made to a room full of Information Industry executives  regarding how to disrupt (and avoid disruption):

–          Almost all information is becoming commoditized.  It will continue to get more transparent over time.  In other words – there will be relentless downward pressure on the price of information/data as it keeps moving closer and closer to free.

–          At Jigsaw we have always maintained that the eventual value isn’t in the data.  The eventual value is in understanding the change in the data.  Companies that do this best will win .  This is where the hockey puck is going and represents the vision behind our signature product Jigsaw Data Fusion.

–          Big information companies are often slow moving dinosaurs who lack innovation – and therefore get disrupted.  They need to read Clayton Christianson’s The Innovators Solution (sequel to his seminal work The Innovator’s Dilemma).  Note: the two books are MUST READS for every entrepreneur.

–          Those getting disrupted have three options:

  1. Buy the company that is disrupting
  2. Kill the company that is disrupting
  3. Form an alliance with the company that is disrupting

–          I pointed out our alliance with Dun & Bradstreet as a great example.  This has been a great partnership for both our companies and driven a lot of revenue.  They did it right by jumping in with both feet rather than dilly-dallying around.

–          I voiced my opinion that some companies can’t avoid getting disrupted.  Encyclopedia Britannica is a great example.  Wikipedia sucked when it first came out.  But… it got relentlessly better – and fast.  By the time Britannica could respond it was too late.  My nine year old son will never even know about Britannica (unless he reads about it in Wikipedia….)

Thinking about the subject after the fact I just have one simple thought: If you think you are getting disrupted rather than doing the disrupting you batter damn well exercise one of the above three options – and with alacrity!

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What The Heck is DaaS?

[Note: this was a post I wrote while CEO of Jigsaw]

DaaS – Data as a Service.  This post is all about DaaS, and how DaaS is going to transform the data model in exactly the same way that SaaS has transformed the software model.

First, let’s get really clear on how SaaS changed our mindsets.  Ten years ago companies that utilized software were in the business of procuring and managing software.   Companies had to first buy the software, then install it on one’s own servers, and finally manage that software over time.  Many companies realized that procuring and managing software wasn’t a core competency – but ten years ago there was no other choice.  Salesforce led the SaaS revolution by convincing companies that choosing to use software as a service was a better way to go.   Interestingly, Larry Ellison is well known for both dissing SaaS as a model that will never make money , and at the same time proclaiming that Oracle will eventually dominate many SaaS offerings.   My belief is that SaaS has fundamentally transformed the software model, and will continue to do so into the future.  All the big enterprise software companies are making huge bets on SaaS.

Take a look at how most companies deal with data today.  They spend a bunch of time and money buying lists, attending tradeshows, and having sales teams prospect for leads.  After companies procure their records the data goes into its container (example: Salesforce) – and it usually just sits there and rots.  Most SMB companies perform zero maintenance on their databases.  Large companies spend a ton of money on the maintenance of their data sets, as well as on procurement.  For companies of all sizes their customer and prospecting database is the lifeblood of their business.  (SaaS got initial traction with CRM for a reason!).   In short, companies spend a lot of time procuring and managing the records that drive the growth of their businesses.  Why would they want to – given a choice to consume data as a service?

My first prediction for this blog is that the data industry is about to undergo a DaaS disruption.  My intention is to make sure Jigsaw is leading the charge.

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