Category: Entrepreneurship

Keeping goals aligned and top-of-mind in a startup helps increase the likelihood of success. Too often company-wide goals aren’t understood by team members and aren’t discussed on a regular basis. In addition to common best practices like an LCD scoreboard in the lobby here’s another, most subtle technique: set the personal and shared startup passwords to goals. The idea is that there are a fair number of accounts that need to be shared amongst team members as well as used personally and these can be used to reiterate goals (make sure and change them at least quarterly).

Here are some example startup goals encapsulated in passwords:

• 10NCin2011 (10 New Customers in 2011)
• 500kMRRinQ3 ($500,000 Monthly Recurring Revenue Q3)
• 50SQLinSept (50 Sales Qualified Leads September)

The great thing about this approach is that it forces team members to think about the goals more often, much like the new advertising services that use CAPTCHAs to engage with brands.

What else? What do you think of using startup goals in passwords?

As part of the Dreamforce Executive Summit there was a private lunch with the famous HBS professor Clayton Christensen. Christensen, best known for the book The Innovator’s Dilemma (at Duke I had economics classes with Matt Christensen, Clayton’s son, and remember him to be very sharp). A year ago Clayton Christensen had a stroke and has since gone through rehabilitation to learn how to speak again. His talk was sharp, funny, and insightful.

Here are a few notes from Clayton Christensen’s talk:

• Decentralization is disruptive, and is hard to catch
• Pace of performance improvement outpaces ability to use improvements
• Entrants typically win at disruption
• Disruption generates repeated upside surprise
• Decentralization follows centralization (think about what has happened with computing and how that will happen with healthcare)
• The right product architecture depends upon the basis of competition

Clayton Christensen told great stories, anecdotes, and really drove his point home that innovation is disruptive. The most common story followed the pattern that a big company doesn’t want to compete in a smaller, less profitable market and an upstart figures out how to be successful in the smaller market slowly moving up market until the big company is defeated.

What else? What are your thoughts on Clayton Christensen and disruptive innovation?

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?