Category: Entrepreneurship

Pivot entered the startup vernacular a few years ago when Eric Ries popularized it on his blog with Pivot, don’t just jump to a new vision. Previously, I’ve espoused the benefits of iterating and believe it’s important to differentiate between the two. Each term has its place in the startup world and should be used accordingly.

Here’s how I look at pivoting and iterating:

• Pivoting – A wholesale change of the current business model in an attempt to capitalize on a different market opportunity
• Iterating – A minor change of the current business model in an attempt to capitalize on a closely related market opportunity

Pivoting is simply a much more drastic form of iterating. When I talk to entrepreneurs and they tell me how they’ve pivoted recently, most of the time they actually mean iterated. Iterate is something you can roll out quickly and casually. Pivoting is a wholesale change to the business and typically takes much longer to execute.

What else? What do you think of the differentiation between pivoting and iterating?

It’s been a great week for venture-back companies filing to go public, especially in the SaaS category. After talking about Eloqua’s S-1 and Jive Software’s S-1, I want to talk about BazaarVoice’s S-1. BazaarVoice provides technologies to help companies manage user reviews and associated content like photos, videos, stories, etc. Think about what Amazon.com provides to build a community of content around their product listings, but now supply everything but the actual ecommerce engine and you end up with BazaarVoice (Amazon.com develops their own social commerce technology and doesn’t use BazaarVoice, but 587 other companies do use BazaarVoice).

Here are some notes from the BazaarVoice S-1 IPO filing:

• Revenues (pg 2):
  2009 – $22.5 million
  2010 – $38.6 million
  2011 – $64.5 million (net loss of $20.1 million)
• Estimate that there are 10,000 companies with at least $50 million in online revenues that can be served by the platform (pg 3)
• A team of people moderates content 24/7/365 in 27 different languages on behalf of clients (pg 4)
• Growth strategy: expand sales force, up-sell clients, greater customer insights, expand internationally, innovate with the platform, selective acquisitions and partnerships (pg 5)
• Accumulated deficit of $40.8 million (pg 5)
• Many potential clients are hesitant to use the software because they don’t want to display negative reviews about products or services (pg 11)
• Client retention rates ranged from 84.4% to 89.4% for 2009 to 2011 (pg 12)
• Largest 100 clients represent 57.3% of total revenue (pg 13)
• 494 full-time employees and 132 part-time content moderators (pg 15)
• Some product development, QA, and system operations are outsourced to Ukraine and Costa Rica (pg 19)
• Only consumed $11.1 million of capital since inception (raised $23.6 million) making them very capital efficient since they are able to use unearned income from clients pre-paying annually to fund the business (pg 42)
• 2008 cohort of new customers acquired represented $2.3 million in 2008 revenue and $17.4 million in 2011 revenue — extremely impressive up-selling (pg 43)
• $10 million line of credit (pg 57)
• VCs and investors own ~63% of the company (pg 124)
• Founder owns 14.3% (pg 124)

The BazaarVoice S-1 was straightforward and detailed without any surprises regarding their business model.

What else? What do you think of BazaarVoice’s S-1 IPO filing?

Yesterday I went through a few notes from the Eloqua S1 IPO filing. Today I want to look at the Jive Software S1 IPO filling that came out this week. Jive provides business collaboration, community, and social software in both on-demand and installed offerings. The easiest way to describe it is as community forums for places like ESPN.com as well as private Facebook-like communities internal to companies.

Here are some notes from the Jive Software S1 IPO filing:

• Revenues (pg 6):
  2008 – $16.9 million (losses of $11.3 million)
  2009 – $30 million (losses of $4.8 million)
  2010 – $46.3 million (losses of $27.6 million)
  2011 first six months –  $34 million (losses of $30.6 million — an impressive amount for six months)
• Growth strategy: Add customers, up-sell customers, add products, extend eco-system (pg 4)
• Q4 is strongest quarter for billings and renewals (pg 11)
• January 2011 hosting outage that affected some customers upwards of 14 hours (pg 13)
• 9-12 months for a new sales rep to be fully trained (pg 17)
• Debt of $29.6 million (pg 31)
• Renewal rates are over 90%, but only measured for customers paying at least $50,000/year (pg 40)
• 15% of billings over the past 18 months have been for contracts greater than 12 months (pg 51)
• OffiSync was acquired for $23.3 million (pg 55)
• Proximal Labs was acquired for $1.2 million (pg 55)
• Filtrbox was acquired for $1.7 million (pg 55)
• Employee count breakdown as of June 30, 2011 (pg 78):
  358 regular, full-time employees
  15 in hosting
  27 in support
  51 in professional services
  122 in research and development
  105 in sales and marketing
  38 in general and administrative
• VCs own ~40% of the company (pg 109)
• Co-founders own 15.8% and 15.8% (pg 109)

Overall, the IPO filing was as expected providing great detail about the Jive Software business.

What else? What other thoughts do you have about the Jive Software S1 IPO filing?

Yesterday I talked about some of the pros of having parallel startups including shared back-office, cross pollination of teams, and more opportunities to time the market. Doing multiple startups at the same time is difficult, and it’s important to address the unique challenges. Today I want to talk about some of the cons of doing multiple startups at the same time.

Some cons of doing parallel startups:

• Potential lack of momentum on any one idea to get the point where it’ll be successful
• Insufficient resources to make the biggest possible impact with any one startup
• Perceived lack of focus and direction

Talking through these challenges and understanding the drawbacks of doing parallel startups is important in the quest for success. There are many different pros and cons of having parallel startups with most successful parallel startup organization being Idealab in Pasadena.

What else? What other cons are there to doing parallel startups?

One of the questions I get on a regular basis when talking to other entrepreneurs is “why do you have multiple companies?” In general, I’m against having parallel startups because it takes so much time and energy to make one successful, let alone several. For me, the opportunity presented itself because my first company was in a great spot with a management team that had worked together for several years and complemented each other well. This freed up my time to explore new product ideas to solve problems I had encountered — there were many itches I wanted to scratch.

Here are some pros of having parallel startups:

• Ability to work on wider range of projects and challenges
• Centralized back-office for HR, accounting, and office management
• Shared office space for better economies of scale (e.g. great internet connection, snacks, games, etc), pseudo co-workers, and more
• Increased idea and experience sharing among the startups
• Better likelihood of getting the market timing right, which I believe is one of the most critical elements
• Startup-specific stock option pools

Tomorrow I’ll talk about the cons of having parallel startups, the biggest of which is that without sufficient resources and dedication by team members, a startup won’t make enough progress to become viable. Having parallel startups can work well with the right pieces in place, the most important being either a successful startup with a complete management team or extensive resources to fund the ideas for extended periods of time.

What else? What are some other pros of having parallel startups?

What are the six most profitable words of all time? Answer: do you want fries with that? In a reverse fashion, every entrepreneur should know the four best money saving words: what’s your best price? Most items are negotiable and you won’t get a discount unless you ask.

Cash is one of the top three responsibilities of a CEO (along with setting vision and getting the right people on the bus). It’s in this regard that the CEO needs to set the tone that getting a competitive price from suppliers is a core requirement. Everyone in the startup should have “what’s your best price” on their lips when talking to vendors.

Now, when doing pricing for our products I’m a big proponent of fixed prices with no negotiating. This strategy ensures pricing integrity across customers, reduced sales cycles, and increased customer trust. It works particularly well with Software-as-a-Service products. But, most of the world works with negotiable pricing and “what’s your best price” should be asked in every engagement.

What else? What do you think of using “what’s your best price” when negotiating?