Khan Academy is one of those great “accidental” entrepreneur stories: smart guys makes educational videos to help his cousins, other people see the videos and clamor for more content, richest guy in the world likes it and invests, and millions of people benefit from awesome, free educational content. Hear this great story, right from the founder Salman Khan in this video of the week. Enjoy!
Continuing with yesterday’s post on The Great Game of Business for Startups, the author has an excellent Huddle Checklist on his site. While a few of the items are dependent on the type of culture and work environment (e.g. a focus on leaving fired-up isn’t common), most are broadly applicable.
Here’s the Huddle Checklist:
Every entrepreneur would do well to ensure that most of these checklist items take place during internal meetings.
What else? What are some more thoughts on the Huddle Checklist?
Earlier today an entrepreneur reminded me of an excellent business book that doesn’t get mentioned often enough: The Great Game of Business – Unlocking the Power and Profitability of Open-Book Management by Jack Stack. The author shares his stories of growing a successful business and emphasizes how educating team members on all aspects of the business (not just their area of focus), combined with transparency and open book management, results in a more aligned and committed team. Of course this makes sense, yet too many CEOs think it’s beneath them to spend so much time on these “softer” aspects of the business.
At Pardot, we worked hard to educate our team and provide an open book environment. Here are some of the things we did:
While open book management makes many leaders uncomfortable, we found tremendous success empowering our employees with as much information and communication as possible. For entrepreneurs interested in learning more, check out the The Great Game of Business.
What else? What are some more thoughts on extensive transparency and employee education in a startup?
Whenever I’m asked about the exit strategy for our company, my response is always “our goal is to build the best possible company, and if an offer comes along that we can’t refuse, we’ll take a look.” The general idea is that it’s best to build a sustainable, high-growth company that makes great, long-term decisions. Pushback I’ve gotten over the years from this strategy is often along the lines of “that’s great, but how do your employees that have equity get to cash out if you have no plans to sell the business.” My response is that our employees are compensated at market-rate salaries and the equity component should be seen as upside that might or might not happen.
There’s another group of entrepreneurs that have an exit strategy — e.g. when we get an offer for $25 million, we’re selling — and, of course, there’s no right or wrong. With a defined exit strategy, or at least a target exit range, it’s important to get all the founders and investors on the same page. If an offer does come along to buy the business, and the leaders aren’t aligned, it can lead to serious internal challenges (things get emotional quickly).
Entrepreneurs would do well to think about their personal approach to the exit strategy question, and if they have a target acquisition price in mind, share it with their inner circle.
What else? What are some more thoughts on a defined exit strategy vs the built to last answer?
Recently I was talking with an entrepreneur that has a small, fast-growing startup. Things are going well and he’s debating raising a Series A. There’s a good bit of interest from venture investors but there’s one hold up: he doesn’t want to take the opportunity of a $25 million (or smaller) exit off the table. For most venture funds, if the desired exit is less than a multiple of the fund amount, it isn’t worth it (e.g. a $100 million fund needs much bigger exits to move the needle).
Here’s what a $25 million exit might look like:
For the founders, potentially having the opportunity to put away $4 million after taxes (if everything goes extremely well) would be life-changing money. Based on the entrepreneur’s goals, my advice was to figure out how to grow the business as fast as possible while minimizing dilution and keeping the option open for an exit that’s still meaningful to them (this might mean raising more angel money or trying to find a debt option). Not all entrepreneurs are trying to build billion dollar companies and it’s important to figure that out before going the venture capital route.
What else? What are some more thoughts on founder value in a $25 million exit?
Recently I was talking with an entrepreneurially twentysomething. He really wants to be an entrepreneur but a) doesn’t have enough money saved and b) doesn’t have a co-founder. At this point, it’s important to tease out if he wants to be an entrepreneur because startups are cool right now or if he really wants to be an entrepreneur because it’s who he is regardless of the timing.
Per the two things holding him back, he could easily be an entrepreneur by day and vallet by night to solve the money issue. As for the lack of a co-founder, it’s 100x easier to recruit a co-founder once the business is actually started and a prototype is in place (many people have a hard time visualizing things and are more easily convinced once they can see something). So, why isn’t he an entrepreneur now? I believe it has to do with being risk averse.
My favorite definition of risk comes from a recent Tim Ferriss post titled How to Say “No” When It Matters Most:
Risk – The likelihood of an irreversible negative outcome.
When people tell me I must love risk because I’m an entrepreneur I always respond that it feels less risky to me to be an entrepreneur. Why? I have a strong locus of control and want to own my destiny. As an entrepreneur, I’m ultimately responsible if we win or lose. That’s how I like it.
The next time someone says “that’s so risky”, ask them if there’s an irreversible component to the potential negative outcome. If the outcome is reversible, and has a reasonable chance of success, it’s likely less risky than perceived. If fact, most decisions and the resulting outcomes are reversible.
What else? What are some more thoughts on entrepreneurs and risk?
Whenever I’m talking to entrepreneurs for the first-time I like to figure out their why (see Start With Why). Why do they do this? Why be an entrepreneur? After understanding the why, I like to talk through the one page strategic plan that was required before meeting. Only, 9 out of 10 times the annual and quarterly goals are too generic. Goals like “raise money” or “sign new customers” are vague. I’m a fan of SMART goals.
Here’s Wikipedia’s definition of SMART goals from the origination of the acronym in 1981:
Another variation has “Achievable” for the “A” and “Relevant” for the “R” in the acronym. Regardless, SMART goals are the way to go and plain goals should be avoided.
What else? What are some more thoughts on SMART goals?
Doug Leone is one of the top venture capitalists and helps run Sequoia Capital, the most prominent venture firm in the world. In this video of the week, Doug talks about why Sequoia looks to invest in immigrant entrepreneurs, how he got his start in the venture world, and what he sees on the horizon for the industry. Enjoy!
From YouTube: “Always take risks. If something is working like a dream, break it. Taking risks is the only way to keep on going,” shared Sequoia Capital Managing Partner Doug Leone during his Stanford GSB View From The Top talk on November 4. He also discussed the venture capital industry, what his team looks for in entrepreneurs, and more.
Lululemon, the athletic clothing company, employs a unique strategy with their employees: everyone has their 1,5, and 10 year goals for personal, health, and career on the wall in each store. Interested, I checked this out at Ponce City Market and sure enough, a dozen sheets of paper were on the wall near the fitting rooms, one sheet for each employee. On each paper, there were two paragraphs written by the employee describing themselves followed by SMART goals. This approach — all employees transparently sharing their goals — is amazing for accountability, growth, and alignment.
Before writing out their goals, each employee is asked to create a 10-year personal vision by answering the following questions:
Then, with that vision in place, the next step is to write out goals, in order of necessary accomplishment, to achieve that vision:
Considering Lululemon started in 1998 and is now worth $7 billion (NASDAQ:LULU), there’s something special about figuring out what motivates people and building an organization that helps them achieve their goals.
What else? What are some more thoughts on Lululemon having all employees create goals and sharing them with everyone else, including customers?
The New Yorker has a great article up on Reid Hoffman titled The Network Man. Reid founded LinkedIn and is a huge believer in networks and the power of relationships. In the article, the author plays back a power meal between Reid and Mark Pincus, founder of Zynga.
Here’s how the power meal works (in this case it was dinner):
While not dissimilar from an agenda at a team meeting, writing down topics to discuss, and prioritizing them with the other person, makes for a much more impactful meal. Read The Network Man and try out the Reid Hoffman approach at your next power meal.
What else? What are some more thoughts on the idea of adding more structure to one-on-one business meals?
David Cummings on Startups 