Category Archives: Startups

SaaStr 2019 Presentation Preview: Five Questions SaaS CEO Wrestle With

I’m super excited for the upcoming SaaStr Annual 2019 conference in San Jose from February 5th through the 7th at the San Jose Convention Center.  I hope to see you there — particularly for my session from 10:00 AM to 10:30 AM on Tuesday, February 5th.  Last year they ended up repeating my session but that won’t be possible this year as I’m flying to Europe for a board meeting later in the week — so if you want to see it live, please come by at 10:00 AM on Tuesday!

saastr 2019

I’d quibble with the subtitle, “Lessons from Host Analytics,” because it’s actually more, “Lessons From a Lifetime of Doing This Stuff,” and examples will certainly include but also span well beyond Host Analytics.  In fact, I think one thing that’s reasonably unique about my background is that I have 10+ years’ tenure in two different, key roles within an enterprise software company:

  • CEO of two startups, combined for over ten years (MarkLogic, Host Analytics).
  • CMO of two startups, combined for over ten years (BusinessObjects, Versant).

I’ve also been an independent director on the board of 4 enterprise software startups, two of which have already had outstanding exits.  And I just sold a SaaS startup in an interesting process during which I learned a ton.  So we’ve got a lot of experience to draw upon.

SaaS startup CEO is hard job.  It’s a lonely job, something people don’t typically understand until they do it.  It’s an odd job — for what might be the first time in your career you have no boss, per se, just a committee.  You’re responsible for the life and death of the company.  Scores or hundreds of people depend on you to make payroll.  You need to raise capital, likely in the tens of millions of dollars — but these days increasingly in the hundreds — to build your business.

You’re driving your company into an uncertain future and, if you’re good, you’re trying to define that future your way in the mind of the market.  You’re trying to build an executive team that not only will get the job done today, but that can also scale with you for the next few years.  You’re trying to systematize the realization of a vision, breaking it down into the right parts in the right order to ensure market victory.  And, while you’re trying to do all that, you need to keep a board happy that may have interests divergent from your own and those of the company.  Finally, it’s an accelerating treadmill of a job – the better you do, the more is expected of you.

Wait!  Why do we do this again?  Because it’s also a fantastic job.  You get to:

  • Define and realize a vision for a market space.
  • Evangelize new and better ways of doing things.
  • Compete to win key customers, channels, and partners.
  • Work alongside incredibly talented and accomplished people.
  • Serve the most leading and progressive customers in the market.
  • Manage a growing organization, building ideally not just a company but a culture that reflects your core values.
  • Leverage that growth internationally, exploring and learning about the planet and the business cultures across it.

Basically, you get to play strategic N-dimensional wizard chess against some of the finest minds in the business.  Let’s face it.  It’s cool.  Despite the weight that comes with the job, any SaaS startup CEO should feel privileged every day about the job that they “get to” do.

But there are certain nagging questions that hound any SaaS startup CEO.  Questions that never quite get answered and put to bed.  Ones that need to asked and re-asked.  Those are the 5 questions we’ll discuss in my talk.  And here they are:

  1. When do I next raise money?
  2. Do I have the right team?
  3. How can I better manage the board?
  4. To what extent should I worry about competitors?
  5. Are we focused enough?

Each one is a question that can cost you the company, the market, or your job.  They’re all hard.  In my estimation, number 4 is the trickiest and most subtle.  There’s even a bonus question 6 – “are we winning?” — that is perhaps the most important of them all.

I look forward to speaking with you and hope you can attend the session.  If you have any advance questions to stimulate my thinking while preparing for the session, please do send them along via email, DM, or comment.

You don’t need to be a CEO to benefit from this session.  There are lots of lessons for everyone involving in creating and running a startup.  (If nothing else, you might get some insight to how your CEO might think about you and your team.)

I hope to see you there.

Two Natural Reactions That Great Managers Suppress

Most employees tolerate their managers more than love them.  According to a year-old survey in Forbes:

  • Only about 50% of employees say the boss values their opinion.
  • Only 35% of employees feel inspired by their boss.
  • Some 25% say they can do a better job than their boss does.
  • Almost 20% say that their boss takes credit for their work.

Given this, there should be no surprise that employee-manager relations sometimes flare up and that when they do employees often feel uncomfortable bringing the problem to their manager.  According to a different survey, 68% of employees are afraid to complain about their boss, fearing retaliation for so doing.

Great companies recognize these, perhaps sad, facts and try to manage around them.  For example, when I ran Host Analytics I would end virtually every piece of employee communications with the following:

If you have a problem with your boss and feel comfortable raising it with them, then please do so.  If you are not comfortable raising it with your boss, then please tell someone.  Talk to HR.  Talk to your manager’s manager.  Talk to any e-staff member.  Talk to me.  Talk to our coach.  I know that when employee-manager relations are the issue, it’s often impossible to raise the problem with your boss.  So please tell someone else.

In addition, beyond setting that as a policy, you can use other mechanisms to detect these issues.  Periodic, ideally anonymous, employee surveys do a great job of finding “hot spots” where an entire team is having problems with its manager.  (We used Culture Amp for employee surveys and its slicing-and-dicing lit up hot spots right away.)  Open-ended questions and comment fields also often reveal troubles on a more individual basis.  So does just walking around and asking people how they’re doing.

The goal from the company’s perspective is to surface these problems so they can be addressed.  Some managers, however, often react in a way that defeats that intent.  When a problem is surfaced via an indirect channel, many managers first instinct is say two things to the employee:

  1. “Why didn’t you bring this to me directly?”
  2. “Why didn’t you bring this to me sooner?”

Both are wrong.  Both not so subtly blame the employee — the first indirectly calling them a coward and the second indirectly accusing them of perpetuating the problem because you can’t fix an issue you don’t know about.   Both show that you care more about yourself and your reputation than you do about the employee.  Banish them from your management vocabulary.

Great managers don’t react this way.  They replace the above two reactions with two far superior ones:

  1. “Thank you for raising the problem to someone.”
  2. “Please tell me more about the problem so we can work on it.”

Maybe three months in the future, once and if the problem is clearly fixed, then the manager can safely say, “by the way, why didn’t you feel comfortable raising that problem to me anyway?”  In that context, the question will sound like genuine interest in the feedback.  In the heat of the moment, all it sounds like is “blame.”

Assume that, regardless of channel used, raising a working relationship issue is very hard for the employee and was probably preceded by some combination of sleepless nights and tears.  So thank them for doing the difficult thing and raising the issue — regardless of how — and respect their courage by jumping in immediately to learn more about it.

Top Kellblog Posts of 2018

Here’s a quick retrospective on the top Kellblog posts (as measured by views) of 2018.

  • Career Development:  What It Really Means to be a Manager, Director, or VP.  The number two post of 2018 was actually written in 2015!  That says a lot about this very special post which appears to have simply nailed it in capturing the hard-to-describe but incredibly important differences between operating at the manager, director, or VP level.  I must admit I love this post, too, because it was literally twenty years in the making.  I’d been asked so many times “what does it really mean to operate at the director level” that it was cathartic when I finally found the words to express the answer.
  • The SaaS Rule of 40.  No surprise here.  Love it or not, understanding the rule of 40 is critical when running a SaaS business.  Plenty of companies don’t obey the rule of 40 — it’s a very high bar.  And it’s not appropriate in all circumstances.  But something like 80% of public company SaaS market capitalization is captured by the companies that adhere to it.  It’s the PEG ratio of modern SaaS.
  • The Role of Professional Services in a SaaS Company.  I was surprised and happy to see that this post made the top five.  In short, the mission of services in a SaaS company is “to maximize ARR while not losing money.”  SaaS companies don’t need the 25-35% services margins of their on-premises counterparts.   They need happy, renewing customers.  Far better to forgo modest profits on services in favor of subsidizing ARR both in new customer acquisition and in existing customer success to drive renewals.  Services are critical in a SaaS company, but you shouldn’t measure them by services margins.
  • The Customer Acquisition Cost Ratio:  Another Subtle SaaS Metric.  The number five post of 2018 actually dates back to 2013!  The post covers all the basics of measuring your cost to acquire a customer or a $1 of ARR.  In 2019 I intend to update my fundamentals posts on CAC and churn, but until then, this post stands strong in providing a comprehensive view of the CAC ratio and how to calculate it.  Most SaaS companies lose money on customer acquisition (i.e., “sell dollars for 80 cents”) which in turn begs two critical questions:  how much do they lose and how quickly do they get it back?  I’m happy to see a “fun with fundamentals” type post still running in the top five.

Notes

[1]  See disclaimer that I’m not a financial analyst and I don’t make buy/sell recommendations.

[2] Broadly defined.  I know they’re in Utah.

Host Analytics + Vector Capital = Growth

I’m delighted to say that Host Analytics has signed a definitive agreement to be acquired by Vector Capital, a San Francisco private equity (PE) firm with over $4B in capital under management.  Before diving into some brief analysis of the deal, I want to thank Host Analytics customers, employees, partners, investors, and board of directors for everything they’ve done to help make this happen.

Going forward, I expect the company’s top three priorities to be growth, growth, and growth.  Why?  Given a large market opportunity and a company that’s executing well, it’s the right time to add fuel to the tanks.

Large Market Opportunity
To wit:

  • The total available market (TAM) for Host’s enterprise performance management (EPM) products is $12B.
  • The market, somewhat amazingly, remains less than 10% penetrated by cloud solutions, which means there is an enormous on-premises replacement opportunity.
  • The market, equally amazingly, still over-relies on Microsoft Excel for planning, budgeting, reporting – even sometimes stunningly consolidation – which represents an enormous greenfield opportunity.
  • Recent consolidation in the market (e.g., Workday’s acquisition and, in my opinion, up-market hijacking of Adaptive Insights) creates new space in various market segments

Executing Well
Host is wrapping up an excellent 2018 with strong sales growth (e.g., new subscriptions up 50%+ this quarter), record ending annual recurring revenue (ARR), historically high customer satisfaction (i.e., net promoter score), above-benchmark employee satisfaction — and we’ve been doing all that while transitioning to positive cashflow.  On the product front, we’ve been pumping out innovations (e.g., Host MyPlan, Host Dashboards) and have an exciting product roadmap.

Simply put, the company is executing on eight cylinders.  Strong execution plus large opportunity usually calls for one thing:  more fuel.

Shareholder Rotation
Host was well ahead of the market with its vision of cloud-based EPM and raised its first venture capital in 2008.  As some of our early investors are thinking about how to wrap up those funds, it’s the right time for a shareholder rotation where our last-phase investors are able to get liquidity and the company can get new investors who are focused on the next phase, i.e., the next five years of growth and scale.

That’s why I think “shareholder rotation” is the right way to think about this transaction — the old shareholders rotate out and Vector rotates in.  And I should note that our largest shareholder, StarVest Partners, is not rotating entirely out — they will remain a significant shareholder in the company going forward.

In many respects, things won’t change.  Host will remain focused on:

  • Delivering a complete EPM suite
  • Providing solutions for the Office of Finance
  • World-class professional services and support, and our desire to create Customers for Life
  • Partnership, working with other leaders to provide our customers with complete solutions
  • Product innovation, finding novel ways to help finance better partner with the business
  • Core values: trust, customer success, and teamwork

Other things will change.  We’ll see some new faces as we evolve and grow the company.  We’ll get the benefit of Vector’s internal management consultancy (i.e., the value creation team) to help drive best practices.  You should expect to see us accelerate growth through both organic means (e.g., scaling up sales, launching in new geographies) and inorganic means (e.g., follow-on acquisitions).

Thanks to our founder, serial entrepreneur Jim Eberlin, for creating the company.  Thanks to everyone who helped us get here.  Thanks to our board for its foresight and support.  Thanks to Vector for taking us forward.  And thanks to StarVest for coming along for the ride.  Onward, full speed ahead!

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Should Your Startup Have a Quota Club? (And How Much to Spend on It.)

December is when most SaaS startups are closing out the year, trying to finalize next year’s operating plan (hint:  I know a software company that can help with that), starting to get a clear view on which salespeople are going to make their number, and thus beginning the process of figuring out who to invite to the annual “Quota Club” (a.k.a. President’s Club, Achiever’s Club, or Sales Club).

In this post, I’ll discuss why Quota Clubs are so controversial and how I learned to think about them after, frankly, way too much time spent in meetings discussing a topic that I view nearly as difficult as religion or politics.

Quota Club is always highly controversial:

  • It’s exclusionary.  Consider this quote my friend Lance Walter heard years ago (I think at Siebel): “the last thing I want at Quota Club is to be lying on a chaise lounge by the pool, roll over, and see some effing marketing guy next to me.”  Moreover, the sales personality tends not to blend well with other departments, so a well-intentioned attempt to send the top documentation writer on a trip with 30 sales people is as likely to be perceived as punishment as it is reward.
  • It’s expensive.  The bill can easily run in the hundreds of thousands of dollars for companies in the tens of millions of annual recurring revenue (ARR) and in the millions for those above that.  That doesn’t help your customer acquisition cost (CAC) ratio.
  • Even the basics of qualification are somehow complicated.  Now, on the face of it, you might that “making quota” would be sufficient to qualify for Quota Club, but in some people’s minds it’s not:  “no, at this company we expect people to make quota, so Quota Club should only be for those at 120% of quota.”  (The idea that maybe quotas are set too low doesn’t seem to occur to these people.)  That’s not to mention minimum attainment rules required to avoid accidents with ramped quotas (e.g., a new rep who sells $400K on a $200K quota.)  Or the intractable problem in decentralized organizations where Country A runs large numbers of junior reps at low quotas while Country B runs small numbers of senior reps at high quotas — so someone who sells $1.25M in Country A attends club while someone who sells $1.75M in Country B does not.
  • Invitations beyond quota-carrying reps (QCRs) are always controversial.  Do consultants who hit their utilization target get invited?  (No.)  Do sales development reps (SDRs) who hit their opportunity goals? (No.)  On what basis do sales consultants (SCs) get invited?  (Depends on SC model.)  Do CSMs who hit their renewals goals?  (Maybe, depends on your customer success model and how much selling they do.)  What about the executive staff?  What about a regional VP or CRO when he/she didn’t make their number?  Who presents the awards to their people?  And this isn’t to mention companies that want to inclusionary and invite some hand-picked top performers from other departments.
  • Guest policies can be surprisingly tricky.  Normally this is simple — each qualifier gets to invite a spouse or partner, with the implication that the company wants to reward the chosen guest for the sacrifices they made while the qualifier was working long hours on the big deal and doing extended travel. What if the guest is a friend as opposed to spouse or partner?  (Well, that’s OK if not quite the intent.)  But what if that friend is coworker?  (Hum, less so.)  What if that friend is another quota-carrying rep who failed to make their number?  (Even harder.)  Or, changing angles, what if their spouse is a sales rep at your top competitor?  What if they run competitive intelligence at your top competitor?
  • Opinions diverge on family policy.   Should qualifiers be encouraged to bring their children?  How about Grandpa to watch them?  Are these family members invited to any events or activities?  Can their pay their own way on the snorkeling cruise if they want to?  Is babysitting covered?  Is the reward for spending too much time away from your family a mandatory vacation away from your family?
  • The business meeting can be a religious issue.  Many sales VPs think Club should be a 100% reward — a complete vacation with no work.  If so, the CFO will take an income tax withholding from each qualifier.  Hence most companies have a business meeting that keeps Club a business affair  — and off the W-2s of the attendees.  Some sales VPs thus think:  do the absolute minimum to stave off the tax man.   More enlightened folks think:  what a great opportunity to meet with our top performers to talk about the business.
  • People can’t even agree on the dress code.  Should the awards dinner be California Casual, Summer Soiree, Creative Black Tie, Brooklyn Formal, or just a regular Black Tie Affair.  (And where do they get these names?)
  • Picking the location is difficult.   The Caribbean isn’t exotic for East Coasters and Hawaii isn’t exotic for West Coasters.  Some people think Clubs should always have a beach location, some think European cities are more exotic.  (By the way, try to find a reliably warm beach location in February or April.)  Should you invest your money in flights to a relatively inexpensive place or get cheaper flights to a more popular and presumably expensive place?  And this isn’t to mention any debates about hotel brands and their significance.
  • In-room gifts can jack up the price.  Club planners seem to love to include special gifts each night.  A welcome bottle of champagne the first night, a beach kit the second, a Tumi backpack the third, and a farewell mini-Margarita kit can quickly add up to $500 in extra cost per qualifier.
  • Planning is intrinsically difficult.   It’s inherently hard to plan when you have 30 QCRs and you’re not sure if 10, 20, or 30 are going to qualify — this is particularly difficult when you plan sales-only Clubs because you have less to fudge in terms of non-QCR attendees.  What do you do mid-year when you’ve planned for 20 and forecast that only 10 are going to make it?  Devalue Club by dropping the qualification bar for some reps or (the same act seen through a diametrically opposed lens) preserve the incentive value of Club by making it a realistic goal for the reps who otherwise had no realistic hope?

Holy Cow, just making this list gets my blood pressure up.  Are we sure we want to do this?  My answer remains yes.

Most startups, once you’re beyond $5M to $10M in ARR, should have some sort of Quota Club.  Here is my advice on how to do it:

  • Define it as the CEO’s club.  You can call it Quota Club or President’s Club, but make it clear to everyone that it’s the CEO’s event.  It’s a big expense (with a huge opportunity to waste a lot of money on top) and it’s full of decisions that are both subjective and polarizing.  Listen to what your current sales VP wants, but make those decisions yourself.
  • Start small.  At MarkLogic our first Quota Club was something like 10-15 people for two nights at the Bellagio in Vegas.
  • Leave room to make it incrementally better each year.  This is what I call Narva’s Rule, after my friend Josh Narva who came up with it.  (By the way, had we better applied his rule, we’d have held the first MarkLogic Club at Caesar’s Palace, saving the Bellagio for the following year — but at least we got the two days part right, leaving room to later expand to three.)  Don’t cover every bite or drink that goes in someone’s mouth in the early years:  folks can get a breakfast croissant at Starbucks or a drink by pool on their own nickel. You don’t need a group breakfast and a pool party to cover it.
  • Be inclusive of other functions.  This lets you recognize a few folks outside of non-quota-carrying sales each year.  (It also makes planning a little easier.)  Don’t be so inclusive that QCR/QCM attendance is less than 50%.  But take all your qualifying QCRs and quota-carrying managers (QCMs).  Add your selected SCs.  Add your qualifying CSMs (according to whatever rules you establish).  Then perhaps add a few folks — based on their helpfulness to sales — maybe from consulting, marketing, product, or salesops.  Helpful e-staff are also good candidates and can benefit from the direct feedback they will get.  Think:  I’d rather run a bit less luxurious event and invite a few more folks from across the company than the converse.
  • Do it at a beach in April, alternating East and West coasts.  Or, if you have a strong ski contingent, alternate between a ski resort in February and a beach in April.  Beware the sales VP will gripe about too much first-quarter time in meetings with a January kickoff and February Club.  But who says you can’t still ski in April?
  • Be family-friendly.  Be clear that kids and family are welcome at the event (at the attendee’s cost) and at most, but not all, activities.  If you have two dinners, make one a bring-the-clan affair and make the awards dinner spouse/guest only.  Let family opt-in to an any easily inclusive activities like snorkel trips. Help folks find and/or pool babysitting.
  • Take the business meeting seriously.  Run the meeting on the morning of day 2.  I like doing attendee surveys in advance (e.g,. via SurveyMonkey) and then doing a detailed review of the results to drive discussion.  This sets the tone that the event is for both fun and business and that the company isn’t going to miss the chance to have a great conversation with its top performers.  Discussing business at Club isn’t a party foul.  It’s part of why you have Club.
  • Stay aligned with event planner, particularly in the early days when you are trying to run a discount event as they will, by default, try to run a standard one.  Skip the bells and whistles like custom event logos, fancy signage, custom beach bags and towels, in-room gifts, and all-meals coverage. Define what your program is going to be and deliver against that expectation.  Then make it better next year.
  • Make and hold to a sensible budget.  Know, top of mind, the total event cost and cost/attendee — and remember that cost/qualifier is about double the cost/attendee, since each qualifier invites a guest.  As part of Narva’s Rule, increase that cost every year. Because I like to make things concrete, I think cost/attendee should range from $2.5K to $5.0K as a function of your typical salesperson’s on-target earnings (OTE) and your company’s lifecycle.  This means the “prize value” of the Quota Club invitation is $5K to $10K, equivalent to a roughly 2-4% bonus against typical OTEs.  On this sort of budget, you can offer a very nice, high-quality event, but you won’t be doing the truly unique, memorable, over-the-top stuff that some CROs like.
  • If you want to have an ultra-club do what we did at BusinessObjects.  While during most of my tenure at BusinessObjects we ran in nice-but-not-crazy mode, towards the end of my tenure there was a movement to make Club truly exceptional and unique.  That first led to discussions on how to trim down Club in order to increase the spend/qualifier, including potentially increasing the attainment bar from 100% to 125% and ending our inclusive philosophy.  I’m glad we didn’t do that.  Instead, we ended up creating an intimate ultra-club as a few days tacked on to the end of Quota Club.  It provided some niche cachet when the attendees were whisked off onto their continuation trip.  It allowed “the movement” to do some truly exceptional things for a small number of people.  Most of all, I think we correctly figured out who the “right people” were — not the one-hit wonder reps who had one big year, but instead the consistent reps around which you truly build a company.  I believe we set 5 years of consecutive Quota Club attainment as the criteria for an invitation to the ultra-club.  I’d invest extra in those people any day of the week.

 

Highlights from the Fenwick & West 3Q18 Venture Capital Survey

It’s been a few years since I wrote about this survey, which I post about less to communicate recent highlights and more to generate awareness of its existence.  The Fenwick & West Venture Capital Survey is must-read material for any entrepreneur or startup CEO because it not only makes you aware of trends in financing, but also provides an excellent overview of venture capital terminology as well as answering the important question of “what’s normal” in today’s venture funding environment (also known as “what’s market.”)

So if you’re not yet subscribed to it, you can sign up here.

3Q18 F&W Venture Capital Survey Highlights

  • 215 VC financing rounds were closed by companies with headquarters in Silicon Valley
  • Up rounds beat down rounds 78% to 9%
  • The average price increase (from the prior round) was 71%
  • 24% of rounds had a senior liquidation preference
  • 8% of rounds had multiple liquidation preferences
  • 11% of rounds has participation
  • 6% of rounds had cumulative dividends
  • 98% of rounds had weighted-average anti-dilution provisions
  • 2% of rounds had pay-to-play provisions
  • 6% of rounds had redemption rights

In summary, terms remained pretty friendly and valuations high.  Below is Fenwick’s venture capital barometer which focuses on price changes from the prior financing round.  It’s a little tricky to interpret because the amount of time between rounds varies by company, but it does show in any given quarter what the price difference is, on average, across all the financings closed in that quarter.  In 3Q18, it was 71%, slightly down from the prior quarters, but well above the average of 57%.

vc barometer

 

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Lost and Founder: A Painful Yet Valuable Read

Some books are almost too honest.  Some books give you too much information (TMI).  Some books can be hard to read at times.  Lost and Founder is all three.  But it’s one of the best books I’ve seen when it comes to giving the reader a realistic look at the inside of Silicon Valley startups.NeueHouse_Programming_LostandFound

In an industry obsessed with the 1 in 10,000 decacorns and the stories of high-flying startups and their larger-than-life founders, Lost and Founder takes a real look at what it’s like to found, fund, work at, and build a quite successful but not media- and Sand-Hill-Road-worshiped startup.

Rand Fishkin, the founder of Moz, tells the story of his company from its founding as a mother/son website consultancy in 2001 until his handing over the reins, in the midst of battling depression, to a new CEO in February 2014.  But you don’t read Lost and Founder to learn about Moz.  You read it to learn about Rand and the lessons he learned along the way.

Excerpt:

In 2001, I started working with my mom, Gillian, designing websites for small businesses in the shadow of Microsoft’s suburban Seattle-area campus. […] The dot-com bust and my sorely lacking business acumen meant we struggled for years, but eventually, after trial and error, missteps and heartache, tragedy and triumph, I found myself CEO of a burgeoning software company, complete with investors, employees, customers, and write-ups in TechCrunch.

By 2017, my company, Moz, was a $45 million/ year venture-backed B2B software provider, creating products for professionals who help their clients or teams with search engine optimization (SEO). In layman’s terms, we make software for marketers. They use our tools to help websites rank well in Google’s search engine, and as Google became one of the world’s richest, most influential companies, our software rose to high demand.

Moz is neither an overnight, billion-dollar success story nor a tragic tale of failure. The technology and business press tend to cover companies on one side or the other of this pendulum, but it’s my belief that, for the majority of entrepreneurs and teams, there’s a great deal to be learned from the highs and lows of a more middle-of-the-road startup life cycle.

Fishkin’s style is transparent and humble.  While the book tells a personal tale, it is laden with important lessons.  In particular, I love his views on:

  • Pivots (chapter 4).  While it’s a hip word, the reality is that pivoting — while sometimes required and which sometimes results in an amazing second efforts — means that you have failed at your primary strategy.  While I’m a big believer in emergent strategy, few people discuss pivots as honestly as Fishkin.
  • Fund-raising (chapters 6 and 7).  He does a great job explaining venture capital from the VC perspective which then makes his conclusions both logical and clear.  His advice here is invaluable.  Every founder who’s unfamiliar with VC 101 should read this section.
  • Making money (chapter 8) and the economics of founding or working at a startup.
  • His somewhat contrarian thoughts on the Minimum Viable Product (MVP) concept (chapter 12).  I think in brand new markets MVPs are fine — if you’ve never seen a car then you’re not going to look for windows, leather seats, or cup-holders.  But in more established markets, Fishkin has a point — the Exceptional Viable Product (EVP) is probably a better concept.
  • His very honest thoughts on when to sell a startup (chapter 13) which reveal the inherent interest conflicts between founders, VCs, and employees.
  • His cheat codes for next itme (Afterword).

Finally, in a Silicon Valley where failure is supposedly a red badge of courage, but one only worn after your next big success, Fishkin has an unique take on vulnerability (chapter 15) and his battles with depression, detailed in this long, painful blog post which he wrote the night before this story from the book about a Foundry CEO summit:

Near the start of the session, Brad asked all the CEOs in the room to raise their hand if they had experienced severe anxiety, depression, or other emotional or mental disorders during their tenure as CEO. Every hand in the room went up, save two. At that moment, a sense of relief washed over me, so powerful I almost cried in my chair. I thought I was alone, a frail, former CEO who’d lost his job because he couldn’t handle the stress and pressure and caved in to depression. But those hands in the air made me realize I was far from alone— I was, in fact, part of an overwhelming majority, at least among this group. That mental transition from loneliness and shame to a peer among equals forever changed the way I thought about depression and the stigma around mental disorders.

Overall, in a world of business books that are often pretty much the same, Lost and Founder is both quite different and worth reading.  TMI?  At times, yes.  TLDR?  No way.

Thanks, Rand, for sharing.