Continuous Employee Feedback

Back in the original days of Pardot, we worked hard to manually solicit feedback from employees. After years of experimenting, we settled into a routine that had a daily, monthly, and quarterly rhythm.

On a daily basis, during our morning standup, we’d ask if there were any heroes or hassles. Heroes were employees that went out out their way to help someone and made an important contribution. Hassles were challenges or impediments for employees to produce their best work.

With this daily feedback, we’d talk about it in-person, address it immediately if there was a certain severity of hassle, and have the person who brought it up add it to the respective idea exchange. An idea exchange is much like a message board where people can submit ideas, comment on them, and vote ideas up or down. Finally, we’d we acknowledge the hero of the month and hassle of the month, defined by votes in the idea exchange, at the first weekly all-hands meeting of the first of the month. The winner for each received a $100 bill and a nice lawn ornament from Delta SkyMall to display at their desk.

In addition to the daily heroes and hassles for employee feedback, we also ran a quarterly anonymous employee survey. The survey was short — 10 questions — that always started with the net promoter question: how likely are you to recommend Pardot as a place of employment to a friend? From there, we’d rotate a mix of questions related to core values, general satisfaction along the lines of compensation, career paths, etc. Results from the survey were taken seriously and we worked hard to make our organization a top place to work (we were rated the #1 best place to work in the city multiple times).

Today, there are a number of excellent tools that take care of employee feedback and engagement in an automated fashion. Programs like TINYpulse, Officevibe, and Culture Amp are lightweight and incredibly effective at gathering relevant information and presenting it in an actionable manner.

Entrepreneurs need to incorporate continuous employee feedback into their companies and cultivate an environment for team members to thrive. The stronger the culture, the stronger the company.

Crisp, Memorable Startup Origin Stories

Last week I was talking to an entrepreneur and I went for one of my favorite questions, “How did you come up with the idea for your company?” Now, this question isn’t concerned with the quality of the idea. Rather, the goal is to hear the origin story of the business, the raison d’être. After some meandering, it was clear I wasn’t getting a crisp, memorable origin story. I wanted something compelling, something that would help me remember the entrepreneur and the business.

At the Tech Village, the origin story is one of the most frequent questions I receive. Here’s my answer:

When I moved to town following college, I had a hard time finding a community of like-minded tech entrepreneurs. We had so many great startups, but no center of gravity for the region. From that experience, I knew that once I had the time and resources, I wanted to create a place to help entrepreneurs thrive and improve their odds of success — a Tech Village.

Entrepreneurs should proactively write out their origin stories. Practice them. Refine them.

Origin stories should be crisp and memorable.

What’s your origin story?

Revenue Financing + Traditional Equity Continued

Last week’s post Revenue Financing + Traditional Equity as the Future of Startup Funding struck a nerve and resulted in a number of comments and questions. Generally, the big idea is that most regions have sub-standard angel communities because the angels don’t make money on their investments. Without regular, positive returns, angels drop out and the community is constantly treading water. The idea for a revenue financing component is to recycle money back into the community sooner — ideally in less than five years as opposed to today’s 7-10+ years — so that angels have a good experience and stay active.

Revenue financing plus traditional equity prompted a number of questions. The big question: how might it work? Here’s a hypothetical example:

  • Angels invest $500,000 into a seed round at a $3.5M pre-money valuation ($4M post-money valuation after the new investment is included)
  • When the startup hits $4M in trailing twelve months revenue (the initial seed valuation becomes the revenue target), ideally within five years (that’s what the entrepreneur’s projections said!), the startup pays the original seed investors back, plus 20%, over the next 18 months (paid monthly as a percentage of revenue)
  • The 1.2x returned to the seed investors becomes similar to negative participating preferred equity whereby that amount is deducted from the investor proceeds at time of exit

Now, 99% of all tech startups never achieve $1M in sales in a calendar year, so most startups, even with six figures of angel investment, will never hit the revenue threshold to trigger payments back to the seed angels. Yet, if some small percentage of angel-backed startups do hit it — say 3% — then more money will flow back to the community faster.

Changing an entrenched format, like typical startup funding terms, is a tall order. When startup communities with limited angel investors come together to improve the recycling of capital, revenue financing should be a consideration.

Revenue Financing + Traditional Equity as the Future of Startup Funding

Today’s standard startup funding model whereby entrepreneurs pitch angels, VCs, and family offices for money in exchange for preferred equity is mostly a challenged, broken process. Outside of the money regions that focus on grand slams, and startups generally with revenue traction and significant growth rates, investing in startups is a great way to lose money.

The majority of angel investors I know have lost money investing in startups.

Perhaps they aren’t good investors. Perhaps it’s the entrepreneurs’ problems. Regardless, this isn’t specific to our region. It’s the same in all regions outside the money centers.

Stories of investors writing a check for $25k into Uber and turning it into $100M permeate the media, yet are so rare it’s laughable. Only, it fuels the stories and desire for more people to become investors.

One potential angel investor described it to me as wanting to spend 1% of his net worth on angel investing so that he could generate a new income stream and be less reliant on his day job. Unfortunately, the chance of that happening is slim to none.

There’s a perpetual cycle of regions trying to improve their local startup investing community. New angels come online and write some checks. They lose their money, and because of the poor outcome, will never do it again. Rinse and repeat each economic cycle.

Well, what’s the solution?

The funding model needs to change.

Over the last few years a new form of startup funding has emerged, but still represents a tiny part of the market: revenue financing. Revenue financing is code for a loan that’s paid back via a percentage of revenue. If the startup does better than expected, it’s a super high interest loan. If the startup does as expected it’s a high interest loan. If the startup does worse than expected, it’s a high interest loan paid back over a longer period of time.

Of course, a high interest loan requires the startup to pay back the debt, which takes cash away from growing the business. And, in the angel world, making 15% per year on the investment takes away the excitement and dream of making a 100x return.

The future of startup funding outside the money regions should be a mixture of light revenue financing and traditional equity.

Light revenue financing, such that the investor gets 1.2x their money back in five years, keeps startup money flowing in the community.

Traditional equity, such that there’s the potential for huge upside, keeps the imagination dreaming.

We’re near the peak of this cycle, and too much money is chasing too few high quality deals, making it a great time to be an entrepreneur. Only, this too will change — it always does.

When we come out of the next trough, and it’s time to re-evaluate the startup funding model, a combination of returning capital to the community on a consistent basis and equity upside will result in a more sustainable and successful eco-system.

A structural change in startup funding is needed. Light revenue financing plus traditional equity will improve the startup world.

When the Increased Startup Burn is Cooling Growth

Recently I was talking to an entrepreneur that went through a challenging period of trying to force growth that never materialized. The playbook is fairly common: raise outside financing, hire a bunch of people, and expect growth to increase. Only, not only did growth not increase, it actually went down. What gives?

Burn was increased with the expectation that more of the same would increase the growth rate. Only, it merely magnified an existing issue: customer acquisition wasn’t repeatable.

Spending money to grow faster when a repeatable customer acquisition process doesn’t exist actually makes things worse. Much worse.

New sales reps are ramped up but the playbook doesn’t work, and now making quota is more diminished with fewer leads and less help.

New marketing programs are ramped up but the previous ones weren’t scalable, and now attention and expertise is spread over more initiatives.

New roles and responsibilities are created throughout the organization in expectation of increased growth, only these require more management time and attention taking away energy from the critical functions.

More isn’t always more. In cases where the fundamentals of the business aren’t working, more actually is a detriment and reduces the ability of the organization to execute.

Before raising money and increasing burn, insure the repeatability of the model. Trying to accelerate something that isn’t working makes things worse.

Focus, Focus, Focus – An Entrepreneur’s Challenge

Entrepreneurs see abundance in the world. An opportunity here, an opportunity there. This serves the entrepreneur well in the early days. Identify a need. Rapidly iterate. Earn product/market fit.

Only, at some point, instead of chasing the next shiny object, it’s time to focus. Instead of a default ‘yes’ it needs to be a default ‘no.’ This is hard for most entrepreneurs.

Famously, when Steve Jobs returned to Apple after many years away, he killed off most of the product lines and reorganized the company around a limited number of initiatives. Focus.

Focus becomes even harder when your startup is ‘hot.’ Everyone wants your time. Investors constantly ask for meetings. Media constantly asks for interviews. Organizations constantly ask for appearances. Ultimately, these are more distractions that make focusing difficult.

Take a few minutes every Sunday night and look at last week’s schedule and the upcoming week’s schedule.

What meetings were worthwhile?

What meetings weren’t worthwhile?

What are you excited about on the schedule?

What aren’t you excited about on the schedule?

Regularly take time to evaluate where effort is spent. Then, ruthlessly cut out the distractions.

Focus. Focus. Focus.

More Thoughts on the Next Level for Atlanta’s Startup Community

After last week’s post on Next Level for Atlanta’s Startup Community, a number of people chimed in with ideas. Let’s take a look at a few.


Ben Alexander highlighted eSports as a high potential opportunity for the region. Between Skillshot Media, Atlanta Reign, Hi-Rez Studios, KontrolFreek, and more, there’s real momentum. To achieve a critical mass, we’ll need 10x that many companies and thousands of employees in the industry.

Inclusive Entrepreneurship

Rodney Sampson offered a detailed analysis in his paper Building Inclusive Entrepreneurship Ecosystems in Communities of Color. Much is to be done in this area and Rodney should be lauded for his work.


B2C is much more difficult than B2B. Why? Human attention and desires are fickle compared to helping businesses do things better/faster/cheaper. With that said, a major B2C or DTC startup success story would do wonders to help the brand of Atlanta. Consumer products are always more exciting than business products.


This past quarter Atlanta companies raised $650M across 38 investments — the best Q2 ever — according to PitchBook – NVCA Venture Monitor. While the amount of funding fluctuates on a quarter by quarter basis, setting a new high bar with our best quarter ever is an indicator of progress. Funding is only one piece of the puzzle, but it’s an important one.

Atlanta’s startup community is making real progress, and has much work to do.

Keep the ideas coming.