Monday, July 21, 2008
There is an old story that goes: sit down and don't rock the boat, I'm trying to drill a hole in the bottom. Trying to scuttle the boat, or business, may not be intentional, but the action or conduct that does that may be all that people can figure out to do. This is part of the problem of the Entrepreneur inside a company has to face. Businesses die today because, in the now common business vernacular, the DNA is wrong (we know it really is the MEMEs (1) that are wrong but the folks with bad Memes think of it as DNA, how foolish, everyone knows you can't change DNA, Memes on the other hand are fluid and can morph with degree of ease).The internal entrepreneur's problem is changing the way the business thinks and acts. Like different DNA in a body, he (or she) is attacked as a fatal threat by the rest of the business unless he is shielded or camouflaged. Protection or shielding does not work that well because it permits all the 'antibodies' to focus on a clear target. An example would be a CEO deciding that he needs to change the course of the business to grow, so he puts a spotlight on the group trying to change the way people think. Targeting, simple targeting. That spotlight makes it clear to all just who has to be wiped out to maintain the status quo. It is the guy rocking the boat that everyone can hate.
Camouflage on the other hand is surreptitious and a bit sneaky, doesn't attract a lot of attention and in the internal entrepreneur's case, lets him win converts, even gets the sympathy vote by the very people who will eventually be changed. By not putting the change mechanism in people's faces you offer a way to adapt that is not confrontational. Traditionally new ways were developed in a skunk works, a place that was simply not visible where the Standard Operating Procedures could be tossed out and newness could happen. Problem is that skunkworking doesn't allow the newness to infect and drive the oldness to change, It leaves the oldness in isolation. You may get a neat new product but you don't necessarily get a new way of doing things. The point is that the internal entrepreneur's job is really to adapt the organization to treat the customer in new ways. To do that his act must be visible and infectious to all but not threatening. Quite a trick, takes special guts, and in the end a love for both the business and customers. Because in today's marketplace this has to be a continuous process. Too bad GM can't figure this out. Question is, can your company figure it out? (1) DNA are the units of biological knowledge that set the pattern for the entity containing them, Memes are units of cultural knowledge the set the pattern for the way the entity thinks Barry W Thornton is technologist, who organizes, manages and explains knowledge. Copyright Barry W Thornton 2008 all rights reserved Labels: change, Entrepreneur, fear, GM, skunkworks, survival, the new marketplace, your company
Thursday, July 17, 2008
Bijoy and I have had a long standing discussion about whether or not you can apply bootstrapping principles to venture backed companies or not. I've always felt that the principles of bootstrapping could be recreated in a venture backed company at some level. For the last two years, I've gotten to be part of a living case study. Taking some time off has allowed me to spend a lot of time reflecting on the effect that raising venture capital money has on a bootstrap businesses.
The Bootstrap Austin website talks about Plato's "Necessity, who is the mother of invention" and its bootstrap corollary "Constraint creates innovation". I don't think I appreciated how important the constraints are in helping a business find itself until now. Constraints are so amazingly important in helping businesses focus on the essence of what matters. Constraints force a bootstrap venture to communicate with customers and prospects to ensure that whatever is being delivered is something that is needed. The money that venture capital brings removes the constraints and my experience has been that when the constraint is removed, the focus on the customers' needs is replaced with either a shotgun approach ("lets see what sticks") or a focus on a perception of their needs. There is a cultural shift that takes places after you raise venture money. First, it changes the mindset of employees who were part of the company before the venture money arrived. It's human nature that when money is scarce you are going to value it differently than when it is plentiful. Second, you begin to hire people who never knew the company as a bootstrap organization but only as a venture-backed one. The overall risk profile of the employee base shifts. Third, one of the benefits of taking venture capital is access to the resources of the venture capitalist who invested in the company. Among those resources are senior executives that will help you round out your team. Generally, the culture of those individuals are even further away from the culture of the company pre-VC. When you add Silicon Valley to the mix, I believe all of these points blow up even more. The cost of living, the importance of speed often perceived as impatience, the sometimes incestuous relationships that maintain the cycle, and the search for the next Google are all factors that are magnified in Silicon Valley but are in no way exclusive to Silicon Valley. Intellectually, I still believe you can apply bootstrap principals to venture backed companies but practically speaking, I believe it is very difficult to do so. Here are some random ideas, none of which have any proof of working, that I believe that would allow bootstrap companies to maintain some of the things that made them successful while still leveraging the catalyst that is money that venture capital provides. - Don't announce internally or externally how much you raised or that you raised money at all. Reducing the number of people that are aware of your the company's bank balance is one way of artificially maintaining a culture. Of course, this is not realistic and comes with other consequences that I feel would outweigh the positives.
- Use budgets and targets to create artificial constraints. Controlling how much your sales team travels (e.g., 3 weeks per quarter) can create constraints that drives the right behavior. A sales person knowing that they have to make every travel day count will make sure that they prioritize the right customers (e.g., balancing the size of the deal with the likelyhood of closing the deal).
- Create a culture of capital efficiency. One such tactic is to be a hawk on expense reports (esp. the first 1-2 that a new employee submits).
- Lead by example. Employees will look to their leaders to determine acceptable behavior patterns. If their leaders are eating at Tavern on the Green and ordering $100 bottles of wine, the employees will think that is acceptable behavior.
- I'll reiterate the leadership point. If the founders and leaders of the company test their ideas by talking to customers, it will create a culture that the "Customer is #1". If the founders and leaders answer support questions regularly or at a minimum on occasion, it will create a culture that support is important.
- Use lore. I can not underestimate the power of stories in creating a company's culture. Every company has some stories the define it. Those stories course through the veins of the organization and every employee in the company knows those stories. When in an ambiguous situation, the employee will have the lore to fall back on to know how to handle that situation.
As I said, none of these ideas have been tested or proven. As such, I would love to get feedback on what things have worked for other companies or if it is even possible to maintain some of the bootstrapping culture in a venture backed company. Neelan Choksi is currently enjoying a 4-6 month break from his efforts on the SpringSource management team, spending time with his pregnant wife and daughter, trying to get in shape, and knocking of the items on his "honey, to do" list.Labels: constraint, culture, customers, funding, necessity, team
# posted by Neelan.choksi@springsource.com @ 3:29 PM 4 comments  
Saturday, June 28, 2008
 I'm reading Predictably Irrational, by Dan Ariely, and came across a story that reminded me of bootstrapping a company. In 210 BC, a Chinese commander named Xiang Yu led his troops across the Yangtze River to attack the army of the Qin (Ch'in) dynasty. Pausing on the banks of the river for the night, his troops awakened in the morning to find, to their horror, that their ships were burning. They hurried to their feet to fight off the attackers, but soon discovered that it was Xiang Yu himself who had set their ships on fire, and that he had also ordered all the cooking pots crushed. With their ships gone, the soldiers had no route of retreat. Winning was the only option. And win they did. 9 battles in a row before defeating the Qin forces. This is similar to when a bootstrapper enters the Valley of Death and commits to their venture, but before they are making money and cash flow positive. They are forced to figure out how to make it work with what they've got. The timeline is not completely in their control. We're always tempted to leave ourselves an escape route or path of retreat. And usually that's a good idea. But sometimes there aren't enough resources to mount the attack and cover the retreat. In order to be successful sometimes you have to commit the resources to what you believe in because the retreat option isn't acceptable. Sometimes once you head down a path there is just no turning back, so you might as well commit all of your resources to getting to the end. When I was CEO of SKYLIST, this happened twice. We were growing and needed to shift focus based on customer demand and a rapidly changing market. Both of those times it was focused on eliminating unprofitable customers and focusing sales on specific types of opportunities. Each resulted in a temporary drop in revenue but strengthened the long term sustainability and profitability of the company. When Datran Media bought SKYLIST, we went through the same exercise again. Each time the SKYLIST business came out stronger than before and had replaced the revenue with better customers within a year. Each time it was the right thing to do and left us stronger than before, but each time we went into it kicking and screaming. Change is hard. When something works, we often get the urge to just do that over and over - well past the point where it stops working. It felt bad to move away from lines of business we had traditionally dominated. But it was turning point for the company. Had we not burned the ships behind us, I'm not sure we would have survived and succeeded. Joshua Baer's latest bootstrap startup is OtherInbox.com. Reposted from AustinpreneurLabels: joshuabaer austinpreneur entrepreneurship skylist
Thursday, June 26, 2008
Bijoy asked me to take my notes from Rick Engel's talk a couple weeks ago and write up a blog. Here it is. Rick Engel is a serial entrepreneur who currently owns Austin Java, Uncle Billy's, Little Woodrows and Paggi House. I love hearing entrepreneurs speak because there's always something about them that strikes a chord with me, regardless of what industry they have focused on. Listening to Rick was no different. What I enjoyed most was that he wasn't in a particular mold. Hard working...absolutely; focused on the customer...you bet. But most of all, he was real. Given where I am in my journey with entrepreneurship and trying to further understand what drives me, Rick's talk was just what the doctor ordered to help kick off my 4 month sabbatical from work. As many of you know, I am a massive sports fan. I also hate inefficiency in every aspect of what I do. As such, " Moneyball" is one of my favorite books. If you are not familiar with "Moneyball", it is an exploration to understand why the Oakland A's with one of the smallest budgets in baseball has been so successful over the last decade. Baseball is fraught with inefficiencies, especially in player evaluation. Billy Beane, the General Manager of the Oakland A's, systematically explored and identified a number of those inefficiencies and exploited them. The sense I got is that Rick Engel does exactly the same thing in his specific industries. Not quite the classic entrepreneur with all of the right business school answers, Rick has identified some formulas for building great businesses and parlayed those formulas into a series of entrepreneurial successes in some of the toughest industries out there. I've got Bijoy (much like Eddie Murphy in Meet Dave) in my ear saying that this truly is the ESSENCE of bootstrapping. Although the tactics of bootstrapping (e.g., demo/sell/build, Power of 2, MRE, etc.) and the lessons learned from other entrepreneurs are important, the bootstrap entrepreneur embarks on a very different journey, the hero's journey. Rather than following the paths that others have carved before, the bootstrap entrepreneur blazes his/her own path. Rick continues to blaze his unique path.
Like many entrepreneurs, Rick indicated he gets bored real quick. Some highlights from the path he has followed definitely support thist:
- As an undergrad, transferred to UCLA to chase a music career
- Jumped to the restaurant/bar industry
- Started 5+ different concept restaurants in Houston
- Even though he downplayed it in the talk, Rick sounded like he started the first online trading company
- Moved to Austin and again eventually re-entered the restaurant/bar business in Austin
- Created a management company for his restaurant endeavors and treated it like a profit center as he would with any of his other businesses.
- Now heading into the condo business
Most fascinating was that Rick claims that business isn't his true passion. You often hear entrepreneurs talk about how passionate they are that they can't imagine doing anything else. Rick's true passion appears to be music and he is just trying to make enough money to get to that deep running passion. This is not to imply that Rick is not passionate about business. Spend 5 minutes talking to the man and his passion for his employees, customers, and businesses are very apparent and very real. I don't think that was made more obvious than in the Q&A session where Bootstrap Austin was treated to his deep knowledge. He rattled off details about traffic percentages, well thought out answers about short vs. long term solutions to his parking challenges, etc. At SolarMetric, the company I helped found in 2001, I played a lot of different roles from accounting, marketing, general management, sales management, management of legals, business development, etc. I had key partners in the company, mostly in engineering and sales execution. In my first year at SpringSource (formerly Interface21), I operated in a very similar jack-of-all-trades manner. I really related to Rick Engel because of my background. Rick was a highly successful repeat entrepreneur who "did everything" himself in his earlier days in Houston. As he grew his career, he was able to get out of the "do everything" mentality by building a restaurant management business to manage his various restaurants and bars. Even as he built the management company, he went against the stream by treating it as a profit center rather than a pass-through company, the norm in the industry. By building the management company in his image and not taking the route that so many others have followed before him, Rick found a way of taking advantage of the scale that additional employees can bring while ensuring the elements of his personality and management style remained. Maybe there is hope for us-chronic do-it-all-ourselves types...one solution is to share the load but make sure the load is shared in a way that you are comfortable. Another almost passing comment Rick mentioned really struck home to me: he feels like he has to be in control; he has to be a top level decision maker. He wants to know about every curve ball. The times when he hasn't been in charge (e.g., after he sold his trading company but stayed on), Rick hated the curve balls that were sent his way because he was not the final authority on the given topic. This is another thing I've struggled with a lot. I've really felt impotent in the past when I wasn't in control. So many times I wanted to tell employees that I would take care of them and make sure that I had their backs. When you aren't in charge, you aren't the decision maker and the best you can do is attempt to influence the actual decision-maker. Rick had some great one-liners during the discussion: "Don't ever have a partner. If you do have a partner, make it a silent partner."
"There are two really difficult things to do: 1) Partner with another entrepreneur - you'll have 2 different ways of doing the same thing. 2) partner with a non-entrepreneur - they can't relate." "Don't ever get to a 50-50% situation on decisions unless you can get out of it." "Bootstrap or die!" and this inspired Kyle Johnson to create a new Bootstrap Bumper Sticker in honor of Rick. The most interesting question posed to me by Business District's Jason Myers was whether I thought I could use some bootstrapping concepts in VC funded companies. My initial answer was a resounding, "Hell no!" but the more I've thought about it, the more I am not sure. I think another blog may be in order to explore this further. My personal takeaway from this talk was the reminder that I have to be the entrepreneur that I am. There is only so much I can get from reading books, business school, and even other entrepreneurs. I can learn from others and incorporate things I learn from other sources into my version of the best entrepreneur that I can be, but it is my unique hero's (or goat's) journey to embark on.
Neelan Choksi is currently enjoying a 4-6 month break from his efforts on the SpringSource management team, spending time with his pregnant wife and daughter, trying to get in shape, and knocking of the items on his "honey, to do" list. # posted by Neelan.choksi@springsource.com @ 10:03 AM 0 comments
Monday, June 23, 2008
"I'm just a small operation with (fill in the blank) employees. There's not much my company can do in sustainability and corporate social responsibility, right? Besides, I'm not even sure what this term "sustainability" really means to me and my business!"
That's a synthesis of what many emerging entrepreneurs have told me during the past several months we've been visioning the new charter for Bootstrap Sustainability. Guess what? Right now in your current business venture, there's plenty of "low hanging fruit" of changes you can make that will improve your company's impact as viewed from the lens of long-term stewardship.
What is Bootstrap Sustainability and how can it help my venture? Glad you asked. Bootstrap Sustainability is an official subgroup of Bootstrap Austin.
Bootstrap Sustainability exists to (1) identify businesses in sustainability that can be bootstrapped, (2) hook those ideas up with entrepreneurs and help nurture new and emerging bootstrap companies in the sustainability (or related) sector, and (3) provide education to the general Bootstrap Austin community.
We recently conducted a 6-hour workshop which brought 20 local thought leaders together in one room to help each other learn more about ourselves and the true nature of our current initiatives.
 Bijoy Goswami led us through a fantastic Bootstrap Bootcamp where he informed, enlightened, and challenged us. Most of us start a company thinking we know what the business model should look like. One of the key insights Bijoy conveyed is that, "the business model emerges. You must first say to yourself, 'I do not know the business model' and get to the position of 'not knowing' and then you can start to discover it."
After the Bootstrap Bootcamp, the group rolled up their shirtsleeves and helped each other work through some of their most pressing immediate issues. In the spirit of the bootstrap community of bootstrappers helping each other perspectives and tactical advice were freely offered. By the end of the day, everybody was delighted with what we accomplished in the workshop and excited with where we are going individually and collectively.
Steve Harvey is the founder and CEO of the new bootstrap startup Cleantegrity, which exists to help emerging "cleantech" companies (such as solar, wind, energy efficiency, green building products, and new water-related technologies) bring more of the right products to market faster. For more discussion or information on Bootstrap Sustainability (or Cleantegrity, of course), please feel free to call Steve during the week at 512.878.6550 or send him an email.
Friday, June 20, 2008
In the age of digital convergence and emerging long-tail economies, Bootstrap filmmakers have a greater opportunity to produce innovative content, find their own audiences, discover alternative distribution, and clear profits on their own terms. Nowhere is that more promising than in Austin, Texas. In 2008, MovieMaker magazine ranked Austin as the #1 city to live and make a movie. "As a hot spot for innovation and film, Austin is an incubator for the future of film. Creative talent and technological vision converge with entrepreneurial drive to explore new ways for independent filmmakers to succeed." - Brandy Rainey Amstel, Writer/Director and Chair of the Bootstrap Film Group. Entrepreneurs forging paths in the film industry are celebrated at the Bootstrap Film Fest. This innovative film festival is on Thursday, June 26, 2008, 6-10:15 PM at Regal Arbor Cinema, Austin, Texas. Taking inspiration from innovation icons, like Apple's Steve Jobs, Virgin's Richard Branson, and Whole Food's John Mackey, Bootstrappers use ingenuity to bypass the constraints of the establishment. The featured bootstrap films, Q&A with bootstrap filmmakers Nils Juul-Hansen, Brandy Rainey Amstel, and Jason Howell, and a bootstrap workshop including Bootstrap Network's founder, Bijoy Goswami, will give the audience a deep understanding of bootstrapping techniques that they can use on their film projects, start-ups, and existing companies. "Bootstrap offers a fresh perspective to the constraints of traditional models. As a serial entrepreneur, I was able to take the bootstrapping concepts I learned from my start-up and apply them to film making. The Bootstrap workshop that follows the film programming, will truly empower the audience with greater possibilities." - Jason Howell, filmmaker. To step beyond the bootstrapping buzz and discover your own hero's journey, purchase tickets and view trailers at Bootstrap Film Fest. Labels: film festival
Wednesday, June 18, 2008
There's an admirable purity about a person that will step inside a ring and put it all on the line. I'm a big fan of mma athletes, or ultimate fighters as they are sometimes called. If you watch the UFC, you know that in today's modern world of competitive fighting, you either know Brazilian Jiu Jitsu (BJJ) or you lose. And in BJJ, there's a common saying that is repeated over and over: always face your opponent. I've heard it in boxing as well, but in BJJ, always facing your opponent is law.  BJJ was invented by the Gracie family in Rio De Janeiro, and is similar to wrestling. However, rather than trying to pin your opponent, you try to "submit him" with a submission hold. In wrestling it is common to turn away from your opponent while on the ground. Submitting an opponent in BJJ is typically done by applying a choke or joint hyperextension until the opponent "taps out." If you apply a submission hold and your opponent doesn't tap out you either end up with an unconscious opponent or one with a severely torn joint. In Brazilian Jiu Jitsu, the easiest way to get tapped out is to turn away from your opponent. I see a lot of similarities between BJJ and starting a business. The easiest way to get tapped out as a business is to turn away from your issues or challenges. As a bootstrapper, you don't have the luxury that investment capital affords. If you don't address your issues, you go out of business and the margin of error is razor thin. The faster you face your challenges, the faster you can address them and move on. If you think your business doesn't have issues, you're probably not looking hard enough I started a return-on-investment consulting business, Wilson & Company, as a nights-and-weekends side job back in 2001. It was just me (not much of an "& Company") and I created ROI models in Excel and Visual Basic to help sales groups of technology companies sell their products. When your company is just you, it's easy to keep tabs on issues. You are the only tab. In 2005, I started Small World Labs, a social networking platform company that currently employs 27 people and has over 100 customers. When you combine the words "product" along with "employees" and "customers," things get more complex. And when things are more complex, there are more challenges to address. Over Small World Labs' history we've faced the gamut of challenges as a company - from founder issues to quality control. Anytime I've seen an issue and not faced it, it has come back to bite us in the rear more severely. You only have 24 hours in the day so prioritization is a challenge in itself. However, deprioritizing an issue does not make it go away. Most times, it gets worse and you start to feel submission hold. That's when you absolutely have to face it or tap out. Sometimes I've found I don't know how to solve an issue at first, but know it exists. Having a good network helps in these situations, from fellow entrepreneurs to business advisors. When you start to share your issues with trusted advisors, you often get a good, honest perspective on how to move forward. However, if you're the CEO, one way or another, it's incumbent on you to make sure your company is facing its opponents and not tapping out. Your employees, customers, partners, and investors depend on it. Labels: brazilian jiu jitsu, business, challenges, financial model entrepreneurship accounting joshuabaer austinpreneur startup, online community, small world labs, social networking software
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