Focus and Why Less is More
Besides questions about people, what’s often one of the most important execution questions for a startup?
What should we NOT do?
Focusing on one or just a few things is the proverbial strategy of “putting all your wood behind one arrow.” Yet it is amazing how much pressure there is to do more. Often investors will push to do more, you will feel competitive pressures to follow all the things your competitors do, and of course you have a long list of things that you’d like to do.
Yet the good thing is that focusing on doing one or a few things really well has proven time and time again to have amazing results. What if I told you that a product that weighs 137 grams or less than 30 quarters, could generate $10 Billion in revenue? in one quarter? That’s of course the iPhone. And what’s even more amazing, in the fourth quarter of 2010 Apple generated almost $27 Billion in revenue from products that can easily fit on a startup’s conference room table.
Now, it’s easy to look at one of the biggest blockbusters and successful companies and say everyone should do that. Yet when Steve Jobs returned to Apple, Apple’s annual revenues had been dramatically declining -- in 1995 $11 billion, in 1996 9 billion, 1997 7 billion -- and many had written the company off. It owes much of its turn around success to its effort to focus. (Disclosure: I worked at Apple from 1992-1996)
In a 1997 MacWorld speech, Steve Jobs outlined the key things on which the Company would focus:
- Board of Directors
- Focus on Relevance
- Invest in Core Assets
- Successful Partnerships
- New Product Paradigm
Fast forward to 9:10 of the video to see Steve talk about this.
Of course, with any good strategy, people should come first and the strategy should come second and thus Apple’s focus on the board and team. And yet points 2 and 3 are all about Focus. To enable its turn around Apple shored up its strengths and focused on creative professionals and education. It canceled lots of products to focus on few and made them great. It invested in re-building it’s brand. In general Apple focused on its core (no pun intended…) before it did anything new and only then did it have a chance to do new things and to eventually become the most valuable technology company today.
But of course, you’re probably thinking, ”Well that’s easy for Apple to do but we’re a startup. We have to go out and do lots of things to in order to become bigger and grow and become dominant!” Interestingly, if you look at almost any successful startup company, they got there by doing a few things, or even one thing, really well before moving on to do something new.
Facebook started out as a service just for Harvard, and then expanded to other Universities, before eventually opening up to everyone.
Google did great search.
Amazon sold books.
These were all unknown companies at some point.
Focusing on one or a small list of things that really matter and getting success there first is key in a startup because you have limited resources -- not enough people, not enough money, and definitely not enough time. You have to get success in one place before moving on to tackle the next set up of things. And there are lots of other examples from companies with which I have worked.
At Lookout (disclosure: I am an investor and Chairman of the Board), we developed mobile security software. We started with Blackberry, Windows Mobile, and Android. About a year ago, we shifted our focus from Blackberry and Windows and put most of our effort behind Android. And now we are the top mobile security app for Android, and one of the top ~25 applications for all of Android. It was a tough decision to shift our focus away from the other platforms, but we had a small team and decided to put all our proverbial wood behind one arrow. And it’s only now that we are talking about expanding internationally and looking at other platforms.
At ZangZing (disclosure: Co-founder), we’re building a new way for groups to share photos more simply and beautifully. We’re starting by focusing on the web and making sure that is awesome before moving into mobile apps. Some people say we should do it the other way around, but we think once you see what we’ve done on the web, you will understand why… And either way, we could have done web and mobile at the same time, but we have limited resources and decided to do one thing well first.
At Vontu (disclosure: Co-founder here too), we developed data loss prevention security software. We decided to focus initially on helping companies with lots of customer data such as credit card numbers, social security numbers and other personal information. And we focused on the US. And only on the Fortune 1000. And even within the Fortune 1000 only on a few key segments: financial services, retail, and insurance. And as we had success, we then expanded and eventually had customers all across the Fortune 1000 and outside the US. The revenue ramp was great -- half a million, 3 million, 13.5 million, almost $30 million, and on the path to $50 million when Symantec bought the company for $350 million.
In summary, in a startup, don’t give in to the temptation to do more because usually doing less results in more success, more quickly.
Anyway, i hoped you enjoyed the post. A few others you might like about planning and execution are Can you Count? and If you don’t know where you’re going, well, you’re lost.
And let me know what you think.
And thanks to Kevin for his awesome focus photo.
Read More
ZangZing – Group Photo Sharing. Simply and Beautifully.
Hi Everyone!
We just rolled out the beta signup for a Group Photo Sharing company I co-founded at www.zangzing.com.
You can learn what we’re up to at our first blog post and thanks in advance for signing up for the beta at www.zangzing.com
Joseph
Viagra No Prescription. Viagra Online Sales. Best prices for excellent quality. Best Quality Drugs. We accept Visa, MasterCard, AmEx, and other cards. Fast online consultation. Only today - viagra lowest price.
viagra no prescription, viagra online sales, levitra or viagra, levitra how long, cialis from india, cialis walmart pricing new jersey, buy viagra from india, cheap viagra in uk, discount pill sale viagra, otc viagra
Startup 132: Why an Exit Strategy is a bad idea
My apologies that it has been so long since I’ve written but I’ve been a little busy the past year and a half. I started a new company called ZangZing which is building a new service to help groups share photos. You can sign up for the beta here. I am also on the board of 3 other companies – Lookout, Smartling, and ccLoop – and an adviser to a fourth – MobileIron.
Exit Strategies
I have been meaning to write about the question of “Exit Strategies” for many months.
Not only has there been lots of press about exit strategies with Groupon turning down a multi-billion dollar offer from Google, but in about 1 out of every 2 recruiting interviews, I am asked the same basic question, “What’s the company’s exit strategy?”.
Let me get right to the point. If you work for a company or meet with a startup CEO that says they have an exit strategy, then you should find the nearest exit. Think of a company with an exit strategy as your floor lighting that will illuminate and guide you to the nearest exit – which may be behind you. (OK, after flying almost 1.5 million miles, airplane humor is too easy).
Now some of you might be asking, “But Joseph, you sold a couple of companies. Why and how can you credibly you say that?”
Well, it’s simple. I don’t believe there really is such a thing as an exit strategy. And I have never had one for any of my companies. An exit strategy implies very short term thinking about how Google, or Facebook or some other deep pocketed, cash rich company is going to come along and scoop the company up. And that type of thinking is simply a bad idea. Check out the definition of exit strategy from Wikipedia:
An exit strategy is a means of escaping one’s current situation, typically an unfavorable situation. An organization or individual without an exit strategy may be in a quagmire. At worst, an exit strategy will save face; at best, an exit strategy will peg a withdrawal to the achievement of an objective worth more than the cost of continued involvement.
When you think of a startup, it’s probably not a good idea if the team is thinking about escape or saving face or withdrawal.
Instead of thinking about the exit, startup teams (and potential employees) need to be laser focused on a success strategy. This means thinking (and asking) about the 3-5 most important things that will make the company successful, e.g. Who do we need to hire? What products do we need to build? How do we grow our user base? How do we make money and become profitable?
A success strategy is about building value. And when you are successful and build value, then you will have lots of options including continuing to grow the company, selling the company, taking a company public, merging with another company and more.
So stay focused on your company’s long term success and along the way you will have lots of hard choices about if and when to “exit”. In writing this, it seems so obvious, yet I am continually amazed that so many people think and ask about exit strategies. Hopefully no one will ask about exit strategies in any future interviews and if they do, then I know they are not good at doing their homework. 
Leave a comment and let me know what you think.
And here is another post about strategy planing that you might appreciate. If you don’t know where you’re going, well, you’re lost.
Lastly, you can also follow me on twitter or subscribe to email updates.
Exit sign courtesy of heathbrandon
Airplane exit sign courtesy of joeshlabotnik
Read More
Riding in the fight against cancer
My apologies as I am updating my blog and it seems I somehow managed to send out an update on this post which I was trying to remove. I thought about sending out an apology email and then thought that “two spams don’t make a right.” I have since turned off auto email option and put the “safety” back on email notifications. Again, my sincerest apologies if you received an email message about this old post. Joseph
—-
It has been some time since I’ve posted. And this post is not about technology but about life.
Each year thousands and thousands of people are affected by cancer.
Some are survivors.
Some are caregivers.
And yet too many are lost.
The statistics are numbing.
But the names are not.
Grandpa
Angie
Bob
Aunt Rose
Bud
David’s Brother in Law
Mauricio’s Mom
Julie
Folia
And many many more.
Even in these tough times, we can not give up in the fight against cancer.
And so I am riding 100 miles to help raise awareness and to raise money. I am trying to raise $10,000. And I need your help.
Please give whatever you can. $1. $10. $100. $250. $1000. Whatever you can do, it will make a difference and inspire and empower people affected by cancer to face the challenges, head on, and hopefully live life on their own terms.
Please help and Donate at http://sanjose2010.livestrong.org/joseph
Thank you.
Joseph
Read More
Startup 131: Term Sheet Dilution Calculator
Well, it’s been a little long since my last post and I apologize. Life sometimes has a way of getting busy but it’s been great. Anyway, given all the interest and posts about Startup Term sheets, I thought it would be useful to share a tool that Charlie Fortenbach, Vontu’s head of finance and operations extraordinaire, created for calculating dilution at various stages of investments.
It’s an excel spreadsheet and fairly straight forward. Please consider it a beta release and we would love feedback, comments, bug fixes, and suggestions for improvement. Also, if you make changes, it would be great if you can send them back to me and then we can incorporate them for everyone.
The model is pretty simple to use. For a series A, simply follow the five steps below.
- Enter the “Pre-money” valuation for the initial financing round (typically a seed round, or Series A venture round).
- Enter the investment amount for each Series A investor. The spreadsheet will handle up to a total of four distinct investors (Investor AAA, Investor BBB, etc.). The model makes no assumption regarding pre-emptive investor rights, such as “pro-rata shares”.
- Enter any issuance of Series A Preferred warrant shares. The issuance of warrants is typically associated with venture debt or convertible notes which is common in the early financing stages.
- For the initial financing round, enter the % of total fully diluted stock (post-money) that will initially be apportioned to the employee option pool
- Input the total “pre-money” stock fully diluted. Given the “Pre-money” valuation, this will set the Series A Preferred Price / sh. In the initial financing round the Preferred Price is generally driven to a round number, typically $1/sh. Certain adjusting splits may need to be applied to drive this price to $1/sh.
One piece of feedback we’ve already received is dealing with convertible notes and we’ll get to that eventually or if someone wants to update the sheet and send it back to me, that would be great.
Also, if you want to talk with Charlie, let me know and I can forward your info.
Enjoy. And if you like this, please share it with your friends using the add to any button below. And if you’d like an email or Twitter update on future posts, feel free to sign up for either.
Related Posts and References
- Startup 124: Term Sheet – Valuation and Dilution
- Startup 125: Term Sheet – Liquidation Preferences
- Startup 126: Term Sheet – Anti-Dilution
- Startup 127: Term Sheet – Voting Rights and Protective Provisions
- Startup 129: Term Sheet – Board of Directors
- Download sample Term Sheet from National Venture Capital Association
Read More
Startup 130: 10 Questions for Ray Rothrock of Venrock
This post is an “email interview” I did with Ray Rothrock of Venrock. I sent Ray 10 questions on venture capital, what he looks for in his investments and the people he backs, as well as what are his favorite iPhone apps. Enjoy.
On Venture Capital
1. Venrock is celebrating it’s 40th anniversary this year. That’s a long time in the Venture Capital business and does not even include Laurance Rockefeller’s “venture” investments in the 1930s in Eastern Airlines and McDonnell Aircraft. How has the venture capital business changed since those early days and in what ways has it stayed the same?
Differences in the business are around the limited partners. These days the money comes from all sorts of institutions – foundations, endowments, retirement funds, etc. In older times, it was largely from wealthy families and individuals. As such, in the 90s the venture activity morphed into an asset class for these institutions as they diversified. The data for this asset class was based on a much smaller business, fewer venture capitalists, less money and still a fairly information inefficient world. That is all changed now. Today, success has a much higher bar because of information flow and ease of access of capital.
Similarities in the business are all about the entrepreneur. There are still people out there trying to invent things and change the world with their ideas. In short, entrepreneurs are still entrepreneuring. I think the personal drivers are also the same – it’s about changing things, not so much about wealth creation. Wealth often comes after success, not the other way around.
2. With so much money “chasing” both consumer and enterprise companies which can get real traction by leveraging services such as amazon’s ec2 and open source software, what are your thoughts about the suggestion that today’s venture model of large funds and big investments does not work?
Big outcomes are mostly driven by huge markets. If the market already exists, it is very hard to take share from incumbents. If the market does not exists, then you need some good luck for the market to happen. So, betting on the creation of huge markets and good luck is really hard to sell. I think a lot of folks have downsized because it is easier to develop numbers for the limited partners that will keep them investing, e.g. ROI. I think venture is about creating wealth – cash on cash. You cannot use ROI to buy a Christmas turkey. Make no mistake, small funds that have great results are wonderful things. If you have a big fund, then you are in a different returns regime.
3. What are Venrock’s top 3 investment areas going forward?
There is a huge trend of outsourcing everything and it is accelerating. Infrastructure that supports this is a huge trend – clouds, networks, SaaS, etc. Data control and management. As the world becomes more and more dependent on data, protecting that data is HUGE. Third, healthcare information. You can only manage what you measure. I think healthcare will see a revolution in measurement and systems associated with that.
4. In addition to a successful information technology practice, Venrock also has a very successful healthcare and medical investment team. How does the complete team work together and make investment decisions on things that are seemingly so unrelated?
Every deal is reviewed and approved by all partners. Technology is only part of the due diligence. Building a business – recruiting, selling, customers, all pertain to every business regardless of category. Since we focus on people, the CEO and team are crucial, even if I don’t understand a science or a market demand.
5. It seems most VCs keep a list of deals they “missed”. What’s your list?
We don’t keep one. We all have our story. Ours was Yahoo. Because of our early internet investing, we saw it very early when it was still at Stanford. We chose not to pursue. Ouch.
On Entrepreneurs and Startups
6. On the “quantitative” side of things, what are the most important things you want to learn about a company in a first meeting?
P&L and Balance sheet are really important. We do all sorts of “unit analysis” and compare margins, rev/empl, and things to determine if a plan is reasonable. One thing not to do, don’t show five year detailed projections unless you know every number. Someone will ask you about why the marketing budget, for example, change in 2013, and you better have a good answer.
7. On the “qualitative” side of things, what do you look for in a company and its founder/CEO? And what turns you off as well?
The CEO must be a leader and a good one. First impressions are crucial as well as impressions after the fourth meeting. I always ask myself if I would want to work for this kind of person. They of course must be knowledgable about all aspects of the business. They should not be flip in their remarks and answers. If they don’t know something – they should just say it and move on. The biggest turn off is, when asked a question it should be answered immediately. Don’t talk for 5 minutes and wander around. That tells me you don’t know the answer or afraid to state it or whatever. Answer, then elaborate, not the reverse.
8. What are the top 3 do’s and don’ts for an entrepreneur presenting at an all Venrock partners meeting.
Do – be mindful of the time and keep the presentation complete
Do – a demo if possible as this conveys best what it is you have
Do – know who are you are talking do. Do your homework.
Don’t – be too jocular or sarcastic or dismissive
Don’t – assume every one in the room has detailed science background to understand. If science is important explain it at a level all will get it
Don’t – don’t forget to tell us why we should invest, e.g. returns, outcomes, comps, etc.
9. What makes for a successful Board of Directors/Investor/Founder/CEO relationship?
Trust and openness. In meetings, keeping an agenda and sticking to it. Startups are complex and staying on point is important. Investor/directors need to be respectful of the preparation for a board meeting and do their homework, e.g. read the materials in advance.
Talk often. This eliminates things drifting too far before the group resyncs.
Bonus
10. What are your favorite 3 iPhone apps?
Music 2 by Simplify Media – access my home music server on my iPhone – I don’t have to carry my iTunes library with me. Shares with 30 people.
TripIt – trip itinerary automation.
AroundMe – access to local business and activities based on location.
———-
I hope you liked the post and feel free to leave a comment or question and I will relay to Ray.
Lastly, if you like this, please share it with friends using the buttons below. And, if you want an update for the next post, sign up below or follow me on twitter. Thanks.
More Links
- Startup 124: Term Sheet – Valuation and Dilution
- Startup 125: Term Sheet – Liquidation Preferences
- Startup 126: Term Sheet – Anti-Dilution
- Startup 127: Term Sheet – Voting Rights
- Startup 129: Term Sheet – Board of Directors
- Startup 128: An Interview with Bill Gurley of Benchmark
- Venrock – Full discloure. Venrock was an investor in Vontu.
- Follow Venrock on Twitter @venrock
Read More