Moritz Says Watch Out for Hot Air and Arrogance

Check out this article in the San Jose Mercury news, entitled Watching Their Words: In A Soft Economy Venture Firms Trying To Avoid Hot Air and Arrogance.

Excerpt:

“There’s a lot of hot air and arrogance in the business that we all would be better off without,” Sequoia Capital’s Mike Moritz declared before about 700 colleagues. He wanted to banish “useless pontificating in front of entrepreneurs working harder than we are.”

“At Kleiner, we’re trying to watch our language,” said John Doerr of Kleiner Perkins Caufield & Byers. VCs who constantly speak of “deals” and “projects,” Doerr and Moritz agreed, reveal their self-interest and slight the labor and “dreams” of the entrepreneurs.

I love the “useless pontification” soundbite. In running Mark Logic, a Sequoia-backed company, I’ve met Moritz several times. In my estimation, he’s one of the VCs least guilty of pontification in Silicon Valley. In my experience, his style is listen a lot and then make a few insightful comments, much like the old EF Hutton commercial: when EF Hutton talks, people listen. But I get his point; your typical VC can pontificate with the best of them, and probably shouldn’t.

Not to quibble with one my shareholders, but on the “working harder” issue, from my perception the guys at our investors (Sequoia and Lehman Brothers) work very hard. Particularly for people who have already been, shall we say “quite,” financially successful, I’m often amazed by their work ethic. For your “average” VC, I think there is a certain lifestyle play, but I think the article does a good job at explaining the mentality at the top:

Both these guys, they love the game. It’s not about making a lot of money. They love the game. That’s a competitive edge. They’re still hungry.”

The article also touches on what I believe is a fairly strong increasing-returns factor in venture capital. Basically, once you get a reputation for being good, you see more business plans, entrepreneurs prefer your money figuring you will provide better advice and connections, and therefore the top VCs see more deals and price them more competitively (i.e., at lower valuations) than lesser firms. Here’s the article’s take on the same issue:

“I think the model’s broken unless you’ve got a brand. And that brand is based on merit,” Pennell said. “If it looks like they’ve got the Midas touch, all the best entrepreneurs are going to go to them. Then they do have the Midas touch.”

Another Burned Unveiler: The UK’s OGC

Branding always has it problems. Often, they’re international in nature; remember the Unix systems vendor Arete? They had big problems in France where arrete means “stop.” Who wants to buy the stop computer?

Sometimes, they’re cultural — I remember at Business Objects when the (English) product manager for BusinessMiner proposed a product icon that had two huge letters BM along with a flashlight running across them. I also remember when I lived in Paris literally begging the French to stop abbreviating Business Objects as “B.O.”

But I digress.  Sometimes, the brand name is just dumb. Remember Monday? Some professional services firm (was it PwC?) was trying to rebrand itself as a day-of-the-week right before they were acquired. Imagine this conversation: “hey, we’re meeting with the Monday guys on Tuesday … or was it the Tuesday guys on Monday.”

In that vein, I am frankly amazed that UPS has continued its “brown” campaign for so long. Are they actually trying to re-brand themselves as brown (as the tagline “what can brown do you for” suggests), or is it a just an expense exercise in synonym creation? While I’m riffing, one wonders if the Mexican Groupo Bimbo should regionally brand their “Bimbo” baked good products much as we call it Hellman’s mayonnaise on the East coast and Best Foods out West, or Hardee’s in some states and Carl’s Junior in others.

Sometimes you successfully run the gauntlet of brand naming only to explode on logo design.

I remember once at (the original) Ingres when marketing spent hundreds of thousands on a new corporate identity only to discover from an engineer at the internal launch that: “the logo looks just like Borland’s new logo.” But by then it was too late to do anything: new cards had been printed, new signs had been made, new ads had been placed. Watching that one experience permanently cured me from the “unveil mentality” that I see common in most marketers.

But this post was inspired by a story in the UK’s Telegraph about the Office of Government Commerce which, despite a simple and descriptive name, managed to blow up on the logo design. Viewed as intended, the logo is a simple set of initials. But in the text message, emoticon culture of today people don’t always view things as intended. Often you look at things sideways, as with the smiley face :-) emoticon.

Sadly for the OGC and its design agency, I guess they didn’t show their new logo to enough generation Y types because, when viewed sideways, the otherwise-innocuous logo resembles, … well, of all things, an aroused snowman. Whoda guessed?

The simple moral — don’t unveil; show your draft work early and often to a wide variety of people.

# # #

End note:  I revised the post revised to remove the accidental inclusion of not one, but two, urban myths: the Chevy Nova anecdote and the Gerber baby food tale (about which I admit being a bit nervous while typing, but heck, it made it into Harvard Business Review in 1984).

User Conferences, Pigs, Wigs, and Lipstick

I’ve been traveling a lot recently (including a nice vacation at Club Med in Mexico) so please excuse the hiatus in posting.

In restarting, I thought I’d blaze out of the gates with a controversial marketing rant on user conference branding provoked, in part, by a Stephen Arnold post on his Beyond Search blog about (what I consider) the disguising of Nstein’s user conference.

Stephen comes from a different place than I do; his focus is to question whether users should attend these topical, vendor-driven conferences or topical, vendor-neutral ones? In some sense, I think he’s taking the bait. Fact is, these supposedly topical conferences simply aren’t: they’re user conferences wearing wigs and lipstick.

Don’t believe me? Then see the descriptive copy on Nstein’s site: “… to create a unique user conference for executives & technical developers …” They buried it, but it’s there.

My question to marketing VPs is simple: when did “user conference” become a four-letter word? Why do marketing teams insist on dressing their user conferences up in wigs and lipstick? Examples:

  • Endeca’s Discover
  • Nstein’s Innovation Leaders Summit
  • Business Objects’ Insight
  • SAP’s Sapphire
  • Cognos’ Performance

I have three problems with these faux-topical conferences:

  • They’re brand dilutive. Does Nstein really believe that people will say, “hey Joe, are you going to the Innovation Leaders Summit this year?” Sure, given enough size and money you can actually achieve that goal — people really do say “are you going to Sapphire?” — but even when you succeed you fail because you’ve diluted your branding. What’s more, if asked, “hey Joe, what’s Sapphire?” he’ll say “the SAP user conference.” All you’ve done is to create a synonym, and where’s the marketing value in that? And, sure as the sun rises, marketing will print the conference brand on all those bags and t-shirts in 10x bigger type than the company brand. Heck, I’ve seen examples where they fail to print the company brand at all.
  • They’re misleading. A disguised user conference isn’t a topical conference. If you went to the Insight conference hoping to hear case studies of how people have used Cognos or MicroStrategy to gather insight from data, then you were sorely disappointed. If you’re going to the Innovation Leaders Summit, don’t expect to hear how Elsevier, Oxford University Press, or Nerac have used MarkLogic to innovate in publishing. Good marketing doesn’t deceive.
  • They’re confusing. Reversing the prior case, whither the poor Nstein user who wants to learn about product directions, network with fellow users, meet with product developers, and visit with corporate executives? Should he go to the Innovation Leaders Summit? No, he’ll think, it couldn’t be something high hifalutin like that. By misnaming the event you appeal to people who shouldn’t be there and fail to appeal to those who should.

I’m fine with themes. I think user conferences should have them to provide a unifying element to the program. And I think the themes should be topical. But when it comes to names and branding, just keep it simple.

  • Call it the XYZ user conference, as we do at Mark Logic (“Discovering Agility” is the theme, not the name.)
  • Or emulate Fast and Cognos who (now) use simple variants of the corporate brand that pretty clearly indicate it’s a user conference (e.g., FastForward, Cognos Forum)

Aside: Some might argue that Sapphire falls into the second category. While Sapphire clearly does not try to position the event as something topical (i.e., there’s no confusion with a gemstone conference), I don’t think it qualifies a good, simple variant either because the company is called S-A-P by some or “sap” by others and when you say “sapphire” you make neither of those sounds. SAP Forum or SAP World would be better imho.

Sure, there’s an appeal in giving your user conference a sexy name. And, yes, everybody else does it. But does that make it right? No. Does it make it good marketing? No. Does it serve your customers? No. All it does is train them not to believe you.

By the way, if you want to host a real topical conference, go for it. It’s a great idea, and I’ve done a few in my day. But if the event is your user conference, then just call it that. Don’t worry: if you have users, then they’ll want to come. (And if you don’t, you have deeper problems than your conference name.)

By the way, I’ll see you at the Discovering Agility conference — just kidding– at the Mark Logic User Conference in June.

QlikView: A Return to Simple

I’ve been hearing more and more from my old friends in the business intelligence (BI) world about a product called QlikView, from a Swedish company, QlikTech, that was founded as a consultancy in 1993 and launched its product in 1997.

QlikTech’s war cry is one word: simplicity. And I like it.

Most mainstream enterprise software packages have been around roughly 15 to 25 years. Over those years two things invariably happen:

  • The usual cycle of feature creep which, while well intentioned, results in hard-to-use bloatware.
  • Massive, multi-level market consolidation

When you take these two factors in combination, it’s scary.

Business Objects, for example, was founded in 1990, starting as a PC tools company. Then the web came along and we created a fairly separate web version of the product (WebIntelligence). Then enterprise reporting became important and, lacking the ability to build a nice enterprise reporting product, we bought our way out of the problem with the $1.2B acquisition of Crystal Decisions. Then software consolidation started big time and the company (I left in 8/04) bought I’d guess a dozen or so additional companies/products such as Acta, SRC, eXcelsius, and Cartesys.

Thus, when SAP bought Business Objects last year, they didn’t buy one company / product; they bought literally dozens, each presumably with its own cycle of feature creep and none of them terribly well integrated. And if you think that’s scary, then think about the state of affairs at Oracle, who’s been much, much more acquisitive.

As I’ve ranted in this blog, I think the industry is starting to resemble the conglomerates of the 1960s. That leaves room for innovators of several types:

  • Business model disruptors. People like Salesforce.com and the SaaS crowd. Or people like MySQL, Alfresco, and the open source types.
  • Focus disruptors. People who want to do one thing very well. QlikTech is here, and I’d say that Mark Logic is as well.

The focus disruptors offer a different value proposition than the modern enterprise software “value proposition” which, sadly, has devolved to something like:

We have a suite of stuff that we’ve accumulated over the years and across the board it does a pretty good job of covering everything you want, most of it not too well, and in many cases we actually have 2-3 different things covering the same space and our consultants can figure out which you need, and yes there’s a lot of redundant infrastructure that we’re slowly eliminating and no, no one will be left behind, so we’re going to maintain all those code lines for years, and because of that innovation will be pretty slow, but that’s OK with us because we bought all our competitors, and you shouldn’t worry because everyone’s using our stuff so you will neither get, nor generally lose, competitive advantage by working with us.

I sometimes wonder on the personal front: “when did we become our parents?” At work, it’s: “when did our industry become the mainframe business of the 1980s?”

I’m a big believer that much as a backlash erupted from the 1980s-era mainframe business so will a backlash (continue to) erupt from the current enterprise software business. Open source is part of it. So is SaaS. And I think focused best-of-breed product vendors will increasingly be part of it as well.

It’s working for QlikTech. In 2007, they say they grew 80% to $80M in revenues and have 7,306 customers in 82 countries. And it’s working for Mark Logic as well.

For more on QlikTech’s thoughts on simplicity, check out the blog on SandHill.com that prompted me to finally write about them — Simplicity: What’s Next in Business Software.

Honey I Shrunk The Company, II: Convera's 4Q08 Results

Convera reported its 4Q08 and 2008 fiscal results (for the period ending 1/31/08). Highlights:
  • 4Q08 revenues of $0.28M
  • 4Q08 net loss of $7.0M
  • 2008 revenues of $1.1M
  • 2008 operating loss of $27.0M
  • 2008 net loss of $9.0M (net of a $17.9M gain on sales of discontinued operations)

Cash and equivalents of $36.6M on 1/31/08, down from $47.5M on 1/31/07, amounting to an $11M burn over the year, including $18.1M of cash they received from the sale of RetrievalWare — or, if I did the math correctly since they didn’t present a statement of cashflows — a pre-sale $29M burn rate on the year, roughing out to a cash burn rate of about $7.5M/quarter. That translates to 4.8 “quarters of cash” — i.e., how long your cash lasts on your current burn rate.

So in the next few quarters, the new strategy better start generating more revenue, or they’ll need to cut expenses or raise (yet) more cash.

The good news in here (and you have to look hard to find it) is growth. 4Q08 revenues were up 139% compared to $117K in 4Q07, and 2008 revenues were up 316% compared to $269K in 2007. It’s nice growth, but it’s off a minuscule base.

The bad news on growth is the 139% instantaneous growth rate (i.e., 4Q to 4Q) is lower than the 316% average one (i.e., 2008 over 2007) suggesting they’re experiencing deceleration. Were they gaining momentum, the instantaneous growth rate would be higher than the average one.

See my original Honey, I Shrunk The Company post here.