Category: Entrepreneurship

On this beautiful Christmas day it’s a great time to reflect on work/life blend. While the phrase work/life balance is more common, I think work/life blend is more appropriate. The days of only doing “work” at the office and “life” outside the office have been over for many years, especially as an entrepreneur. Things like this blog are more “life” for me and less “work” as I believe it’s a great way to capture thoughts and help other entrepreneurs minimize common mistakes and grow faster.

As for me, I achieve my version of work/life blend by defining a rhythm and sticking to it. Here’s the rhythm I’ve been followed for a few years now:

• Weekly
  – Friday date night
  – Weekend kids adventure
  – No more than one business breakfast event and one evening event
• Quarterly
  – Family vacation out of town for one week
  – No more than five days of business travel
• Annual
  – Getaway without the kids
  – Review the family rhythm and priorities

I highly recommend coming up with a work/life blend plan, implementing it, and adjusting it as needed. This simple framework has been beneficial to me.

What else? What are some other thoughts on work/life blend?

Most startups have an arch enemy and only a handful of other serious competitors. While markets might seem crowded from the outside, on the inside there are usually just a handful of companies that compete on a regular basis. One caution with an arch enemy is to not get caught up in the functionality arms-race. That is, don’t blindly copy new competitor functionality just because they’re boasting about it.

Here are a few thoughts on competitor functionality:

• Competitors might be positioning themselves for a move in a different direction (e.g. to a different vertical, up market, etc), so analyze the potential motives
• 5-10% of functionality added by a competitor will actually not be useful (e.g. they’ll make a big splash about the new functionality but customers won’t actually use it for a variety of reasons)
• Listen to customers, especially ones that best represent the ideal customer, and deliver new functionality that meets their needs, not the needs of competitors’ customers

Playing the functionality game with major competitors is standard course for entrepreneurs. Resist the temptation and focus on adding value to the right customers.

What else? What are some other thoughts on comparing competitor functionality?

I had been stewing on this one idea for a couple weeks now and suddenly the answer came to me. I had clarity. I had relief. I knew exactly what to do next. Only, sometimes it takes a few minutes for clarity and sometimes it takes a few weeks. I like to make decisions quickly, with an optimistic outlook, and learn as much as I can as I go along.

Here are a few areas to seek clarity as an entrepreneur:

• Personal mission, vision, and values
• Family mission, vision, and values
• Company mission, vision, and values

Clarity is powerful in so many ways. The next time something doesn’t feel right, step back and seek clarity on it.

What else? What are some more thoughts on clarity?

Continuing with yesterday’s post Revenue Run-Rate to Raise a Series A, the immediate follow up question is: assuming low-to-mid six figures of recurring revenue, when’s the best time to raise a Series A? While the simplest answer is that the best time to do it is anytime you can do it on good terms, the real answer is more nuanced.

Going back to the four stages of a B2B startup, stage one is product-market fit. With a few hundred thousand in annual recurring revenue, there’s a good chance product-market fit is in place. Next, stage two, is building a repeatable customer acquisition process with good metrics (e.g. the ratio of cost of customer acquisition relative to the lifetime value of the customer). Once this has been achieved on a small scale, it’s the best time to raise a Series A round of financing. Why? With firm customer acquisition metrics, it’s easy to make a compelling case that investing X dollars in the business will turn into Y revenue. Investors want a compelling story and many focus on financial models, so when there’s a clear path to significantly increase the startup’s value relative to money invested, investors get excited.

The best time to raise a Series A is when a repeatable customer acquisition process is in place with good metrics.

What else? What are some other thoughts on the best time to raise a Series A?

Here’s a common conversation I have with entrepreneurs:

Entrepreneur: I want to raise a $2 million Series A.

Me: Great. How much recurring revenue do you have now?

Entrepreneur: We’re just getting started and have a few pilot projects.

Me: Cool. What’s your annual revenue run-rate?

Entrepreneur: Well, we don’t have any revenue yet.

Me: Unfortunately, the chance of you raising a Series A is slim-to-none.

Of course, investors want a great management team, market, traction, growth-rate, and, naturally, revenue. So, what’s a good target run-rate to raise a modest Series A (e.g. $2 million – $3 million)? From my experience outside Silicon Valley, I’ve found entrepreneurs usually need to have $250,000 – $500,000 in recurring revenue (annual run-rate) to raise a couple million dollars from investors.

Now, investors typically want to buy 20-35% of the company with each round of investment, so that means a $2 million investment for 25% of the company results in a pre-money valuation of $6 million and a post-money valuation of $8 million. Is a company with $500,000 in recurring revenue worth $6 million? That’s for the market to decide.

What else? What are some more thoughts on revenue run-rate to raise a Series A?

Whenever I give a talk and tell the Pardot story, one of the 10 most popular questions I get is “did you have a plan to sell the company?” My response is always that our goal was to build the best company possible and to make sure that it met the two following conditions:

• Be the best place to work and the best place to be a customer
• Follow the core values of positive, self-starting, and supportive

If a potential acquirer comes along and makes an offer we can’t refuse, we’ll look at and consider it (which is what happened). Put another way, the business isn’t for sale, but tell me what you’re offering.

Yes, it’s common for entrepreneurs to have a financial goal and to sell the company when the financial goal is met. Based on how much luck and timing is involved in a successful exit, I think the best approach is to build a company to last, not to sell.

What else? What are some more thoughts on build to last or build to sell?

Recently, I read a post about how entrepreneurs like to think that growth is readily planned and predictable. Then, an employee that had been in a hyper growth startup, said “no”, it’s not the planned growth that everyone thinks. Rather, it’s like striking oil and the resulting mad dash to take advantage of it as quickly as possible.

Here are a few thoughts on planned growth and striking oil:

• Consumer-oriented startups are more likely to strike oil and achieve hyper growth, but more entrepreneurs will be struck by lightning than achieve this level of growth (read about the Beanie Babies story)
• Software-as-a-Service (SaaS) startups that have a human-lead sales process are going to be limited by the number of sales people, and thus growth can be much more planned
• SaaS startups with a self-service sales process that don’t require sales people can grow faster, but are more rare
• Growth planning is more realistic once a repeatable customer acquisition process is in place (read the four stages of a B2B startup)

Planning and thinking through different areas of the business is important regardless of growth rate (use the Simplified One Page Strategic Plan). Entrepreneurs would do to plan for growth and know that it’s much more complicated than it seems.

What else? What are some more thoughts on planned growth and striking oil?