Getting the real dirt

Jeff Nolan has an interesting post about how a US General views blogs as an excellent source for unfiltered information. Jeff goes on to postulate that CEOs could also get unbiased information from their field as well.

In the private sector it’s only a matter of time before CEO’s, at least the better ones, start figuring out that the best way to get the straight scoop on a topic is to drill down to the field by reading the blogs that exist within the company. Of course, this isn’t an entirely efficient process for an executive who probably already has too much on his/her plate, so the opportunity that exists from a tech standpoint is to aggregate blogs and apply BI techniques to sort, categorize, and apply qualitative filters to. I suppose you could make the case that this is what Technorati or Feedster are doing, but I’m not sure that’s what I am envisioning…. I’m going to need to put some more thought into this and report back at a later time.

This is yet another example of how the web is helping make inefficient processes more efficient, especially when we are moving away from a command and control world to one where empowered individuals or nodes on the edge make decisions. In this world, getting unfiltered information from the edge becomes more important. Rather than squelch his troops, it is quite nice to see that General Myers gets it and is embracing blogs as another data point for him. .

Post mortem

I recently had a board meeting for one of my portfolio companies and was upset because during the sales pipeline review we only heard great things about the pipeline, new closed deals, and the possibility of beating our quarter yet again. What bothered me, however, was that we did not spend enough time discussing the big losses or missed opportunities. Evaluating losses is a great leading indicator for health in a business. If you can get to the heart of why you are losing deals early on, you can prevent big problems down the line. More often than not, management teams will do the opposite and revel in their victories and not spend enough time in defeat. Great management teams, however, will learn from their losses and missed opportunities – they will learn what went wrong and why to make sure it never happens again. This is like preventitive medicine – diagnose early before large problems arise. This, in my mind, is an important trait to institutionalize in a company. While hitting your quarter is a great thing, if you never take a proactive stance and do post mortems on lost opportunities, your competition will eventually catch up to you. Talk to the prospect and try to understand whether it was the process, the sales person, the product, pricing or competition. After a few of these data points, you will have a better view of why you lost and what you can do to fix it. I strongly believe that you can learn just as much from your losses as you can from your wins.

Innovation is not dead

Here is another example of why commoditization is not killing innovation. In fact, it can and has given a number of companies a leg up in terms of developing and deploying new products in record time and at low costs. Using so-called commodity software and hardware actually does not kill innovation but speeds it up.

For example, Metapa, one of my portfolio companies, has begun shipping a software product (Metapa clustered database) that enables customers to deploy terabyte scale data warehouses on clusters of commodity computers running open source software. To that end, the company just announced a joint customer win and partnership with Sun.

In the press release, Jeff Mayzurk, VP of technology for E! Networks, says:

“Deploying a unified data warehouse has always been a strategic goal of E!, but with the total cost of ownership associated with traditional solutions, it hasn’t been practical. Metapa and Sun provided a truly unique solution allowing us to implement an enterprise class data warehouse with the price/performance level that makes our initiative possible.”

Dave Powell, CEO of Metapa, goes on to say:

Metapa and Sun are excited to announce E! Networks as a joint customer and a flagship example of how companies can capitalize on the performance advantages and operational returns of open source and commodity computing for data warehousing,” said Dave Powell, president and CEO of Metapa. “CDB leverages commodity computing, open source database technologies and breakthrough parallel processing algorithms to deliver unprecedented price/performance when compared to traditional, proprietary database solutions.”

To reiterate, commodity computing and open source software can enable breakthrough solutions such as what Metapa is delivering with Sun X-86 hardware. My hats off to the team at Metapa for making this happen. In addition, I love having an early customer win that is referenceable and with a partner that can help replicate this win in a big way.

Global expansion

We are truly living in a global world these days. Many startups I meet with today are either taking advantage of offshore development or have pushed up plans to expand sales internationally. Given the broader scope of this trend, I have changed the category name Offshore Resources to represent a broader theme, Globalization. While taking advantage of a global economy is a great idea, it certainly can be disastrous for some companies. You can’t just take your existing blueprint for sales and R&D and adopt it in a foreign country. I mean didn’t we learn our lesson from the world expansion of the British empire? So if you are thinking about expanding globally, I suggest reading Jeff Nolan’s post on making sure you have local market knowledge. There are a number of great examples and issues that he outlines.

While you may think VCs only want to hear about your company using offshore resources and selling internationally, I am oftentimes underwhelmed by the naivete of some of the entrepreneurs about how and why they are expanding globally. For example, before doing business in other countries, I suggest making sure that you take care of your home market first. The US is a large market, the customers are closer, and the cost of doing business is lower. In fact, if you can have your first customer within driving distance that is ideal. Trust me, customers love knowing that you can show up at a moment’s notice to solve any problem. It is easier to keep a customer happy when you can show up in a half hour than in 24 hours. On the offshore development side, just think through why you are offshoring work and what kind of work you plan on doing in a foreign country. Over time, I have increasingly come to the conclusion that if you are going to do it, make the investment upfront to hire your own team. While the idea of using consultants to get to market quicker sounds attractive, the churn rate is way too high. The time and effort you put forth to train consultants becomes wasted when they jump ship and find a higher paying opportunity.

We don’t like surprises

One of the recurring themes of dealing with VCs and boards is that we do not like surprises. In addition, tell us the facts, and if there are any negative surprises give us action steps on how you are going to remedy the situation. I have written about the VC/Entrepreneur relationship before and due to its importance will continue to write about it in this blog. Yesterday was one of those days where these themes kept surfacing in my conversations and email and I thought I would share a couple of examples with you.

In one meeting yesterday a VP of Sales candidate for one of my portfolio companies walked me through one of the biggest lessons learned in his first start-up experience – lay out realistic numbers and hit them. That means that if you do not have 100% confidence that you will hit the quarter, don’t pad your sales pipeline and wait until the end of the quarter to tell us about a potential miss. You are not doing us a favor by letting us feel like we are going to hit the quarter. Tell us as soon as you know – yes, board members can read between the lines as sales is a numbers game. In addition, explain the action steps you will take to solve the problem so it doesn’t happen again. To say the least, he learned alot from that first board experience.

Later in the day, I got an email from another portfolio company’s CEO outlining a potential issue with a key partner. Not only did I like the fact that he communicated with the board right away, but I loved how he included a detailed action plan to resolve the issue. This included securing a meeting with the decision maker ASAP. While all of us were concerned about the news and shared our own thoughts on the action plan, we all felt like we were doing all that we could to overcome the partner’s issues. In the end, I am sure it will work itself out, but it would have been utterly inexcusable if we learned about this after the fact.

Anyway, I hope these stories continue to hammer home the importance of working with your board in an open and collaborative manner. Look, bad things happen, but what gets a VC and board upset is not knowing soon enough, soon enough to potentially take corrective action.