Jason Calacanis has a new cause.  He is railing against the so-called “pay-to-pitch” phenomenon.  A good read – check it out here.

Update: Scoble, Fred, and Lance have since commented on it as well.

My views on the pay-to-pitch thing are pretty well known, as I’ve written about it a ton in the past, and we’ve torn the topic to shreds several times on the podcast.  And I think we (the larger community, of which I am but a small part) have done a pretty good job here in Atlanta, at least, of (A) educating the entrepreneurs, and (B) tearing down the walls that allowed that sort of thing to come about in the first place.  Many of the pay-to-pitch groups don’t even bother with Atlanta any more (because they know they’ll get a boot in the face from the community). But I will add a few additional thoughts here …

I think the fact that someone with Jason’s “web-clout” is a bit late in jumping on this bandwagon is illustrative (to me, at least), of how “disconnected” the valley-minded crowd can be from the rest of the country.  Don’t get me wrong – I want Jason to fight the good fight   But StartupLounge (and others) have been screaming about this, and fighting against it, for several years.

There is a difference between someone in a place like the Valley paying to pitch, and someone in Des Moines, or Tampa, or Atlanta, et al.

If you are paying to pitch in the Valley, you and/or your idea, must really blow. It’s like the handful of applications for CapitalLounge that we get from startups in California that want to come to Atlanta to find money.  Wow – really? WTF?

If you are paying to pitch in some other part of the country (i.e. an under-served capital region, like Atlanta), you may very well be sitting on the next Google, but you likely don’t have the infrastructure and support system around you to tell you that you are wasting your capital paying to pitch – you may think that you don’t have an alternative. And that is where education comes in play.

Uneducated entrepreneur + desperation = “Gee, I bet I can charge this clown $5K to come ‘pitch’ at my service-provider dry hump fest.”

To me, it is all about supply and demand.  How do you kill the demand, since killing the pay-to-pitch organizers is, well, illegal? We’ve found that making more well-rounded, educated, and agile entrepreneurs is the best antidote for the pay-to-pitch problem.  If I had a nickel for every entrepreneur that we’ve collectively “converted” from the dark side through stuff like StartupLounge/CapitalLounge, PitchCamp, Startup Riot, ATDC, Startup Gauntlet, mentoring, et al, I could fund half the deals in the Southeast at least through Series-D

At any rate – good read – Jason’s a firebrand – gotta love it.  Kick ass – take names – peace out.

Cheers.

A few weeks ago, I had the pleasure of sitting down with Jason Jones of CresaPartners, who hosts a podcast called “Battlefield to Business” for Business-to-Business Magazine.  If you don’t know Jason, he’s a great guy, and a former naval aviator who served on the aircraft carrier U.S.S. Enterprise.

We had a great candid chat about how my personal military experience translated into the business world, specifically the world of fast-growth startups.  We covered a variety of different aspects of startups, ranging from team building, cross-pollination, culture, problem-solving, hiring employees, risk taking, leadership, and the applicability of small unit tactics. I shared some stories not only from my Army days, but also anecdotes from my day job as well as other tidbits from throughout my professional career.

Thanks to Jason for the opportunity to hang out and share my perspectives on a subject that is near and dear to my heart.

It was great fun, and hopefully some folks will find some value in my ramblings. I will admit, having now done nearly 40 podcasts for StartupLounge.com, it felt very different being on the other side of the microphone – good fun, though …

You can listen to the podcast here on their site, or locally using the embedded flash player below.

Cheers.

The down market seems to be working in our favor. This probably isn’t going to news to some of you, but I thought I’d share a few random thoughts on this.

As a FOSS (Free, Open Source Solution) company, that also offers a cloud-based software-as-a-service option, we’re sorting through more deal opportunities than we can handle right now. We’re hiring based upon real growth … which is the ultimate barometer of any startup’s progression.

CIOs and other tech decision makers still have the same problems to solve within their organizations, they just don’t have a blank check book to work with anymore.  No one ever got fired for bringing in a Microsoft, Avaya, SAP, or any other market leader to implement a solution.  But if they can’t afford to do that, they can either look to a startup or smaller company for a solution, or postpone the project until the market gets better. Tech decision makers like to be heroes, so cater to that.  Give them a solution that makes sense to them in a down market. A down market is a GREAT time for an emerging company to secure a beachhead against established players.

So how do you cater to them in a down market?  I suppose there isn’t one correct answer – it will vary depending upon your business, but … here are some thought starters based on what we’re seeing.

Startups can be more agile and creative with pricing and infrastructure. You don’t have 25,000 mouths to feed.  Yet … You have a handful.  Be aggressive with pricing – don’t try to get your whole nut on your first deal or two.  Get creative. Options are limitless – per seat, per transaction, per CPU hour, etc.  Are those up-front professional services fees getting in the way of closing the deal?  Waive them, and incorporate them into a transaction fee where the customer can pay for them over time.

Make your solution solve a real problem. In this market, the checks are being written to solution providers who can truly offer an efficiency or savings (of either time or money, or hopefully both).  If you aren’t doing this, you probably won’t last in the enterprise space. Don’t make your internal champion go back and explain why his or her boss needs to write a check to you.  Instead, arm them so they go back and show how much time and money they’ll save by bringing you in AND how painless it will be to get started. Everyone wants an on-demand solution these days – the days of NIH are shrinking.

If your solution doesn’t really solve a problem – make it solve one.

Get the deal DONE (especially if it involves a reference customer). If you can do this, others will dial down their perceived risk of entrusting a critical function to a startup provider.  It could even be worth losing money on a deal like that if you know it will open other doors for you – plus it slows your burn or at least helps you get to breakeven.

Put it in the cloud. Hardware is now a commodity.  It is a lot easier and cheaper to build a cloud solution these days.  Blade server prices are down to incredibly advantageous levels.  And if you can’t or don’t want to do it yourself, check out Scalr.net, which has a fantastic interface around Amazon’s EC2 service.

Enterprise services are the “ultimate mashup”. If you are an enterprise services startup, and you can effectively add value somewhere in a chain of web services, you have a decent shot at surviving this “Great Correction” as I’m calling the current market – but you are going to have to get deals done outside of the box.

Would love to hear some other thoughts …

Cheers.

Our bizdev guy jockeying for the top spot.  FAIL!

I’ve been involved in no less than two dozen software or Internet-related launches in my career.  Having just finished the initial launch of StarPound, I thought I’d drop a few notes here about launching.  This post will ramble a bit, as I am still really decompressing from the launch.

I will preface this by saying that no matter how many times you’ve launched stuff, you will learn something new each time.  Embrace it!

The Launch Date

Putting a flag in the ground and declaring the date to the whole team is a big motivator, but it can be risky. But just do it. You can’t hit a date unless you first have a date to hit.  And your team has to have input and buy-off on that date.  It should be a stretch goal, otherwise, it is meaningless. 

If your engineers are telling you it will take 60 days, set an internal date of 45 days.  Get everyone motivated to hit that date.  If you are excited about things, they will, in turn, get excited about those things and will become superhuman during the last two weeks leading up to the launch.

But be careful about publishing your engineering date to the market …   You really need to know your engineering capabilities and what pitfalls might crop up ahead of the launch – otherwise, you could be setting yourself up for embarrassment.

And of course, don’t commit the whole team to a date and be “that guy” (or gal) that does’t do anything to  help them get there.  Which leads me into …

Don’t be Afraid to Get your Hands Dirty

If your the type of leader that likes to sit back and delegate, you shouldn’t have left your nice job at Bellsouth (unless you had no choice, of course).  Funny thing about people – they respond very well by being lead from the front, and not the rear.

Back when I was in the Army (under Reagan – sheesh I’m getting old) there was this one Lieutenant that all the guys wanted to serve under.  Young guy – green as hell – but he got his hands dirty.  He wasn’t above pitching in to get the job done.  Whatever it took.

When I arrived in Germany to my line unit in 1987, my new platoon sergeant has to break me in, so he dogged me and made me serve motor pool duty for a week – in the cold rain – scrubbing a whole fleet of original 105MM M1 tanks that were covered in mud (they had just come back from a big field exercise).  While the more veteran guys walked by me hazing me for being a new recruit, this Lieutenant walks up and asked me what I was doing. I told him.  He took his parka off, rolled up his sleeves and helped me wash every single tank on the line.  Most of the other officers were lame in comparison.  This guy gave a sh*t about his team, and we responded in kind.  We would have walked through the fire for that guy – and some of us did.

In any startup, people are expected to wear multiple hats, each and every day. 

If someone has a problem with that, you need to get rid of them – period – because they will kill you in the end, one way or another.  I recall one day a few weeks ago where my schedule roughly consisted of the following tasks:

• Morning status meeting with the whole team
• Writing PHP code for our new web site
• Biz Dev: meeting with a new Fortune 500 customer
• Meeting with potential investor
• Using Photoshop to create new buttons for our app
• Market research – then working on marketing packets
• Interview new sales guy

And this was just my schedule.  Other people had it much worse.  If you cannot willingly wear multiple hats, or  you don’t have the skills needed to wear multiple hats, you have already made your journey that much more difficult. If you really don’t have the skills to help out in other areas, make an effort to learn.  It’ll make you a better leader in so many ways.

In short – delegation is a fine skill to have, but you have to earn the right to use it, and you earn that right by leading from the front, not the rear.

Sales and Business Development

Don’t ignore the sales effort while you are prepping for the launch. You don’t want to wake up with a nice launch, and no one to show it to. If you aren’t balancing sales and business development calls with launch-related stuff, you are heading down a very slippery slope.  The technology dead pool is full of companies that blew their wad on great launches, but they ended up mostly being “all hat and no cattle.”

At the same time, don’t distract your engineers with too much sales support – they need to stay focused on the task at hand, which is getting product to market.  if you do need to tap your engineers for sales support, try to streamline their involvement as much as possible.  Do you really need to drag your whole development team into a pre-sales meeting?  How about just the CTO?  Another approach is to set aside a certain block of time each week that they can be available for sales support, rather than ad hoc’ing everything.

Patience.

People will miss things, so accept it now – certain tasks, even critical ones, can get lost in the noise. You’ve gotta stay on top of everything and everyone.  And guess what, you will miss things, too.  Get over it.

Your team’s level of motivation and attention to detail is going to have a fairly direct correlation to your ability to keep things moving forward, despite the cyclone spinning around you.

The 90% Solution

This is something I’ve espoused for a long time, and it is rarely more fitting than when you are trying to launch something new.  The 100% solution is never attainable – so forget about.  Strive for 90% and try to get that part right. The rest will come in time.

If you had a splitting migraine, would you pay someone for a pill that solved 90% of your pain, or are you willing to suffer in misery while they work on the pill that solves it all?

Cheers.

Matt McCall (Draper Portage Ventures) wrote a very interesting post yesterday. In it, he describes the current venture capital landscape as having “flatlined”. Matt is an ultra bright, fairly conservative venture capitalist (at least he was way back when Portage was a key investor in one of my past lives – MetalMaker). A good read if you are currently launching a startup, and/or you are seeking funding for one.

I’m certainly not an economist, but I will say this: things could certainly be better. The job market sucks, the housing market is nonexistent in many places, and we’re staring $5 gasoline in the face. But how does it really affect the capital-seeking early-stage entrepreneur? It doesn’t sound like this is a particularly compelling time to start a new venture. Possibly, but not necessarily.

I founded my last company in 2000 – unless you were living on a deserted island then, you will remember how nasty the market was. Nevertheless, through persistence and self-funding, I managed to keep the thing going until I could exit (2005 – when the market was more in my favor). Timing is everything, as they say. Granted, the exit wasn’t overly lucrative, but we made money, and no one got hurt in the process.

I do want to point out one thing, though (and Mike and I are going to discuss this a bit in our podcast recording session later today). If you are an entrepreneur that is banking on someone else’s funding to help you to build, launch, and realize your dream – your expectations were probably out of line to begin with, so now it gets doubly hard for you. I see deals like this all the time (as do most investors):

Acme Software provides a world-changing solution to the way consumers shop online! Our cutting-edge, paradoxical approach to e-commerce will drive us to $1B in revenues in just 24 months. Seeking $5M to hire a team, build out the product, and start selling it.

Sorry, not gonna cut it. This is laughable. Telling an investor that “with my time and your money, all things are possible” is not a value proposition. If anything, it a nice fat red flag to any serious investor that you aren’t a bankable jockey (rightly or wrongly – this is the reality).
A tough capital market makes the second mile on your journey possibly more arduous – however, the first mile should not be affected. Innovate, sell, and meet the investors halfway.

In an underserved market like Atlanta, you are not likely to waltz in and secure a first round of capital with an idea alone (save for the occasional angel that truly gets what you are doing). Even if you have a prototype product, your chances may only marginally better. So guess what? Nothing has really changed for you. However, once people are buying what you’re selling, the opportunity will stand out like a diamond in the rough. This is your challenge.

If Acme came in with this pitch, however, things get interesting:

Acme Software’s beta product currently provides over 50,000 consumers with a very unique way to shop online. For the first 12 months after launch, the company generated revenues of $1M, and we’re now at cash-flow break-even. Seeking $2M to expand our product and to expand our sales efforts.

When markets get tough, investors withdraw. Their margin for error is already small, and it gets even smaller in tight markets (true for most entrepreneurs as well). However, entrepreneurs are in a slightly different position. They have the “x factor” – the gene. The thing that makes them drive for success even through the toughest of times. The thing that separates mid-level Fortune 1,000 managers from someone who will try the unthinkable. When the landscape sucks, it actually drives innovation and resourcefulness even further. A blessing in disguise to a serious entrepreneur. Not the same for investors – they are often content to ride out the storm – as well they should, since they are most likely investing someone else’s money. But if your deal represents a chance to return even a mild multiple in a tough market, you may find takers.

Good deals get funding … still. They likely always will. But proving yourself to be a “good deal” could be getting a lot harder if you are on the uber-early end of the spectrum. So adjust your expectations if you need to, then get out there, execute, and don’t worry about things you can’t control. Turn a bad market into an opportunity to move forward, while many others sit on the sidelines. If you can’t (or aren’t willing to) do this, you are most likely going to find the next 12 months to be a colossal waste of your time, energy, and precious capital.

Of course, if your venture is already off and running, Matt serves up some pretty good advice to try and insulate yourself. Good reading, for sure.

Cheers.

I’ve started watching (Chef Gordon) Ramsey’s Kitchen Nightmares on BBC on my cable package. Although I started watching because cooking is a hobby of mine and I’ve always been fascinated by the restaurant business (when I worked at McDonald’s as a kid, I loved it), it has struck me how wonderfully educational the program is for entrepreneurs in general.

(note – Chef Ramsey does a reality show on Fox called Hell’s Kitchen – not the same show at all)

The premise of the show is Ramsey, a celebrity chef and owner of multiple high profile restaurants around the world, visits small restaurants that are failing and provides 7 days of consulting to turn them around. I’ve noticed several themes that have clear parallels with entrepreneurial ventures in general. For example:

• Understanding what drives profit is important and often counter to conventional wisdom (serving high-end, elegant food is sexy but is much harder to do profitably – the profitable activity often isn’t the sexiest).
• There’s no substitute for roll-up-your-sleeves marketing. When Ramsey analyzes a restaurant, he goes into town and interviews people to see why they aren’t coming. Then he goes out with the owner go out into the general public when the restaurant re-opens for marketing. Lesson 1: lots of the most important marketing is not all that sophsticated. Lesson 2 – even millionaires should never think they are too good to sell to the public. Lesson 3 – Figure out who your customers are and talk to them.
• Lack of product focus is an insidious source of pain for a company. When restaurants have menus with dozens of choices, food production is a nightmare – you don’t get particularly good at preparing many dishes. Plus, your sales staff (wait staff) has a much more difficult learning curve.
• Denial of problems (Ramsey is excellent at facing the brutal truth, usually involving a great deal of profanity) is a killer – once you recognize problems, even deep problems can be surprisingly easy to fix if you take a cold, dispassionate look at them.
• Even one wrong person on the management team can be a company-killer. They need to be excluded from the company quickly once it’s determined that they are the wrong person.
• Managing employees who are friends is really difficult because it’s hard to ask your friends to do things that you expect your employees to do – and it’s even harder to provide firm guidance when required.
• Management is leadership – people have to want to do what you say not just because you pay them, but because they value your approval. You can’t leave your employees in the trenches and hide from crisis. You have to treat employees with respect (that’s very different from coddling), and you have to be willing to do whatever it takes to make the customer happy.
• Poor communication among the production (chef), management (restaurant owner) and sales (waitstaff) – often leads to lousy food and lousy service.
• Lack of passion on the part of owners and employees leads to sloppy execution (you can’t provide good service to customers without a passion for what you do). In one show, the head chef realized he really wanted to work with troubled teens (which is why he staffed his kitchen with them) and he left the restaurant to be a social worker.

If you’re interested in becoming a more skilled entrepreneur, I highly recommend watching this entertaining and edcuational show. My wife Cordelia, who also loves entrepreneurship, is also hooked and it’s become quality time for me and the Mrs.

I’ve found good lessons for me as a manager from the show. You may also.

– mike

We had a great time at the recent PitchCamp session. If you haven’t heard of PitchCamp, it is a free workshop that we offer to entrepreneurs to help them better refine their pitch. We also get into some adjacent areas, such as the ins and outs of investor networking, and how to maximize the value from things like our StartupLounge.com investor networking events. It is amazing to hear the difference in the “before” versus “after” pitches.  And you get the benefit of learning by watching all the other pitches evolve as well.  Good stuff.

The first few times we did PitchCamp, we had 20-25 entrepreneurs in the room. It turned out to be too many. It was hard to give everyone the attention they needed in a limited amount of time. We’ve cut the audience in half, so only 12 slots are available for each session (which we seem to be doing once a month now).

Another cool thing is that something like 60-70% of the angel investors in our Angel Lounge have shared their interest in helping at PitchCamp. We hope to bring in some of these folks to help out with the sessions moving forward.

We have a few slots remaining for our upcoming May 7th, 2008 session. It is from 2p-5p over near Galleria. If you are interested in attending, contact me and let me know. This thing fills up fast …

Cheers.