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5 posts from January 2010

January 27, 2010

A Lost Generation of Entrepreneurs?

I've been worrying lately that we are suffering from a lost generation of entrepreneurs.

That was my first reaction when I read what Sequoia's Doug Leone said a few weeks ago about innovation and age at a recent talk with MIT Sloan students visiting Silicon Valley, where Leone claimed that only people under the age of 30 are truly innovative.  Over 30 folks can manage innovation, Leone observed, but you need to be under 30 to create it.  Examples cited included Jack Dorsey, Twitter's founder who was 30 at the time that he started the service.

Now you can argue whether this is right or whether it's a hyperbolic statement for effect, but let's put that aside for now.  Here's my worry:  when I was under 30, I had the opportunity to be a part of a rocket ship start-up (Open Market), that promoted me into an executive team position of a public company in my 20s.  The lessons and skills from that experience inspired me to delude myself into thinking I could be the founding president of another start-up, Upromise, when I was 30.  At the time, when I looked around at my peers and friends, they were all doing the same thing at a similar age.  Folks like Jeff Glass, who started m-Qube at around the same time and age, Scott Friend, who became president of ProfitLogic, Russ Wilcox at e-Ink and many more). These companies all eventually became substantial companies that each resulted in exits north of $100 million.

Now fast-forward to today.  During the period of 2001-2009, there have been very few substantial start-ups built to allow that generation's 20-somethings to learn and develop company-building skills.  As a result, we have a lost generation of entrepreneurs. Not enough 20-somethings, or let's even say under 35, have had the opportunity to see success at a young age and learn the important lessons of start-up leadership.  I think once you've seen some success in your 20s, you are that much more likely to be a strong entrepreneurial advocate, mentor and serial starter in your 30s.

When my partners and I tried to develop a list of today's under 35 entrepreneurs who had started companies and seen meaningful success with them, it was a depressingly short list.  In addition to Twitter's Jack Dorsey, Mark Zuckerburg is an obvious one, as are the YouTube founders, Chad Hurley and Steve Chen.  Less well-known standouts include the Great Point Energy team (Andrew Pearlman and Avi Goldberg), who saw some success at Coatue (sold to AMD) which led them to starting what looks to be a fascinating and potentially game-changing clean energy company.  And there's Ric Fulop, who co-founded A123 in his late 20s, last year's IPO darling.

So what do we do about it?  I suppose one thing we can do is celebrate the heck out of the under 35 entrepreneurs we know who have seen success because we need their peers to know that it's possible and encourage them to serve as role models to today's students so that we don't suffer from yet another lost generation in the years ahead.  So who else should be on our list?

January 18, 2010

The Five Domains of High Performance

I'm pleased to have a guest blog post by Kevin Oakes, CEO of my portfolio company i4cp (the Institute for Corporate Productivity) and a leading thinker in leadership and high performance.

Pick a leader - any successful leader. Then search Amazon and see how many books and other publications come up on that person. Abraham Lincoln? 83,642. Gandhi? 61,923. Even Barack Obama, who was widely introduced to the world just five years ago, has 8,670. People love studying successful people.

In the same way that many people have an insatiable appetite to study successful leaders, we in the business world tend to be fascinated with high-performance organizations. What are they like? What do they do differently? Is there a secret recipe that allows them to outperform their competition?

Of course, many books have been dedicated to this subject. From Tom Peters’s and Bob Waterman’s early 80’s best seller In Search of Excellence to Jim Collins’ Built to Last and Good to Great, there has been a succession of books that leaders and managers across the globe have devoured. Programs such as GE’s Six Sigma have trained countless people in how to achieve top performance and consultants have built entire practices around elements of high-performing companies.

While business professionals want to learn more about high-performance organizations in the hopes that they can apply some of the secret sauce to their own organization, many of the companies profiled within the pages of the aforementioned books were unable to sustain high performance. In fact, the number is about half. While much has been written on the subject, the truth is that the ingredients to high performance remain something of a mystery.

Part of the reason is the definition - what exactly do we mean by high performance? Is there a difference between simply surviving (which was the fate of some of the companies profiled in Built to Last, for example) and performing well over a long period? Do we mean companies which outperform others in their own industry or across industries? Over how long a time period does an organization need to perform exceptionally well in order to be considered a “high performer”? And which measures, financial or otherwise, are the best ones to use?

Over the last three decades, i4cp researchers have looked at various ways to define high performance and the traits that separate the consistently top organizations from the rest. Through that time, we have come to recognize high-performing organizations as ones that consistently outperform most of their competitors in four primary areas:

  • Revenue growth
  • Market share
  • Profitability
  • Customer satisfaction

And, over the years, our research team has examined well over 100 different core human capital areas and tried to determine the differences between high-performing and low-performing organizations. The research has clearly shown that no single ingredient guarantees organizational success. Rather, high performance is like a delicate entrée - based on a staple of core ingredients any one of which, if left out or of inferior quality, will ruin the entire item.

The Five Domains of High Performance

Our research has shown that there are five basic ingredients which separate higher performers from their lower-performing counterparts:

  1. Their strategies are more consistent, clearly communicated and well thought out. They are more likely than other companies to say that their philosophies are consistent with their strategies and their performance measurements mirror their strategies.
  2. Leadership is clear, fair and talent-oriented. Those leaders are more likely to promote the best people for the job, to make sure performance expectations are well known and consistent with the strategy, and to be committed to developing their people.
  3. There is a commitment to the right talent within the organization, and while employees are treated as unique individuals, the organization takes a holistic approach to managing and making decisions based on data-driven information. This begins with a strategic approach to workforce planning. It entails looking at the organization from an outside-in perspective that identifies the business model components and areas that drive value and then determines what the organization needs.
  4. The culture is strong in all the right ways, and employees are more likely to think the organization is a good place to work. Employees not only adapt well to change, they embrace it. High performers also emphasize a readiness to meet new challenges and are committed to innovation.
  5. They are more likely to have a strong market focus and go above and beyond for their customers. They are organized internally around what’s best for the customer, they think hard about customers’ future and long-term needs, and their strategy is based on customer data. And they are more likely to see customer information as the most important factor for developing new products and services.

While these five domains - Strategy, Leadership, Talent, Culture and Market - may seem a bit broad or even obvious, the separation our research has shown between high and low performers in these domains is startling. For example, in a just-released study on high performance by i4cp, the following graph depicts this separation:

These findings, along with previous studies, have convinced us to target our research on discovering the best ways for companies to boost their performance in these five domains and the numerous sub-domains within. We’re convinced that companies that focus on excelling in these areas are cooking up a surefire recipe for long-term success.

i4cp's 4-Part Recommendation:

  1. Take stock to determine where your organization stands in these five areas, and be honest - even the best performing companies aren’t always superb in each area. To get an objective view, survey the workforce on these domains as well as use other assessment tools.
  2. Once you’ve determined your areas of strength and weakness, make sure senior management is involved in improving on the weak areas while not taking the eye off of the strengths; in tough economies it can be easy to stop focusing on core areas that the company has excelled in. Don’t forget to investigate the practices of other organizations that are excelling in your areas of weakness; it’s amazing how some very simple and inexpensive ideas can make a huge difference in closing the gap.
  3. Although companies should focus on the specific tactics for boosting their performance in each of these five areas, it’s important to align the five areas as a whole. Each domain feeds off the others, and ignoring one is like leaving a key ingredient out of a culinary masterpiece.
  4. Although these efforts should continue indefinitely to sustain performance over time, organizations should also do regular reevaluations of their progress so they can make course corrections as needed.

View a recording of a webinar, The Five Domains of High-Performance Organizations.

January 14, 2010

Why Invest in oneforty and the Real-Time Web?

Today's announcement of our investment in oneforty is a useful prompt to talk about why I'm a big believer (and now investor) in the real-time Web.

The real-time Web (i.e., the overwhelming stream of instant, free flowing information available digitally) is clearly hitting the mainstream. One can declare this confidently when even CNN calls it a "top 10 trend" for 2010.

The recent debate over Twitter's traffic volume (as played out in TechCrunch and betaworks' John Borthwick's blog, "Charting the Real-Time Web"), suggests that the real-time Web is continuing to explode, even though the standard tracking measurements are unable to accurately capture the data.

Interestingly, the reason there is a debate is that the real-time Web, and Twitter activity in particular, is by and large invisible to the standard Web methods of traffic monitoring, information search and discovery. When I fire up TweetDeck to track real-time news and information (I almost never go to websites anymore to read the news - it is curated and linked for me via Twitter) as well as the changing status of my friends and family via Facebook (also tracked conveniently in TweetDeck), these information streams are invisible to compete and other web measurement services. Google and Bing are scrambling to catch up and paying Twitter good money to access the data stream (which, Spencer Ante of BusinessWeek reports, enabled Twitter to become profitable in 2009).  All of this, and the more robust Twitter API, is transforming Twitter into a platform company rather than simply an engaging consumer service.

If you want to build a platform, you need to attract developers. Ryan Saver, Twitter's platform chief, reported recently that there were 50,000 Twitter applications to date and that the first-ever Twitter developer conference (whimsically named, "Chirp") will be held this year.

Which leads me to being an investor in oneforty.  If you believe the real-time Web is an exploding environment that allows the distribution of content and identity like never before, and if you believe Twitter is taking a fundamentally open, platform-driven strategy that transcends the Web, then you conclude that there is a new economy forming around the Twitterverse.  And a new economy needs a marketplace. That's where oneforty comes in. 

The 50,000 applications available on Twitter - and the tens of thousands coming - need to be discovered, rated and reviewed, and ultimately be available for purchase. These developers need services to get their apps discovered and a back-end platform to take payment.

Founded by Laura Fitton, oneforty has established itself as the leading application store and marketplace for Twitter. Laura, known as @pistachio, is a great entrepreneur and her story is an amazing one. As the single mother of two kids, Laura loves to refer herself as "the Accidental Entrepreneur" and a Cinderella story.  But with only a few hundred thousand dollars of seed money and a bit of help from TechStars, Laura was able to build a strong team and launch the service and establish it as an early leader.

We'll see how it plays out.  Is the real-time Web as large an evolution as the Web itself or simply an embedded feature?  Will Twitter become a big, successful platform or will it remain simply an entertaining service?  Will oneforty become a major on ramp for Twitter and the evolve into a community-defining marketplace?  Those are the questions that will play out in the coming months and years.  It should be fun.

Follow me on Twitter:  www.twitter.com/bussgang.

January 10, 2010

Where Have All The Good Mentors Gone (from Boston)?


I confess to being a Shrek fan. My kids made me (well, sort of) buy the music CD to Shrek 2 and my favorite song on that CD is the Jennifer Saunders song - "Holding Out For A Hero". When they were little we would play it over and over again in the car.

I had that song ringing in my head as I joined a few other start-up mavens at a recent gathering last week organized by Scott Kirsner at the Microsoft NERD Center in Kendall Square.  One of the topics we discussed was: where have all the good mentors and angels gone from Boston?  Unlike in Silicon Valley, where successful entrepreneurs seem to jump back into the fray start-up after start-up, Boston's successful entrepreneurs seem to fade off into the sunset.

Two of the more successful companies in Boston in the 1980s were Lotus and Powersoft.  Their founders -- Mitch Kapor and Mitch Kertzman, respectively -- are brilliant guys with an incredible amount to offer.  Unfortunately, both moved off to California and are active investors and mentors for young start-ups out there.

I served as an executive team member of two companies in Web 1.0 era who were very successful in their day - Open Market (IPO 1996, peak market capitalization of $2.5 billion) and Upromise (acquired by Sallie Mae in 2006 for 9 figures and today has $21 billion assets under management in 529 college savings accounts and 12 million members).  My two bosses, Gary Eichhorn (Open Market CEO) and Michael Bronner (Upromise founding CEO), were incredible mentors to me, but both are now retired and mainly focused on non-profit activities and family.

Unfortunately, for the next generation of young entrepreneurs in Boston, there simply aren't that many former founders/CEOs who built large, successful companies hanging around.  I can't blame them, but in order for this community to build the next wave of billion dollar companies, we need more senior talent mentoring and investing in our youth.

There are some signs that things are changing.  For example, Bill Warner (founder of Avid) has invested a ton of energy in helping get TechStars off the ground.  And it was good to read in last week's news that Don Maclagan, Nicholas Negroponte and James Pilotta have stepped up and invest in music-intelligence start-up Echo Nest.  I would love to see more of this going forward.  We need the old heroes to stick around and teach the next generation!

"Where's the street-wise Hercules to fight the rising odds?" - Jennifer Saunders.

follow me on twitter:  www.twitter.com/bussgang

January 05, 2010

Why Do VCs Blog (and Tweet)?

For decades, the venture capital industry was like a Yale Secret Society - very clubby, discrete and opaque.  VCs had all the power in the VC-entrepreneur equation, and entrepreneurs had to work hard to decode the mysterious VC process to obtain funding.

My how the world has changed in a few short years.

Pundits will tell you that in terms of trends, 2009 was the year of the real-time Web/Twitter, smart phones/iPhone and the mainstream emergence of digital advertising.  But 2009 was also the year VCs blogging and tweeting really became mainstream. 

Today, over 100 VCs blog regularly (including all five of the Flybridge general partners!). One blogroll puts the number at 129 VC bloggers. That's 10-15% of the active VC population of 1000.  Here's how I get that number:  the NVCA says there are 882 firms in existence in 2008, but with many firms no longer investing new money, I would estimate that approximately 400-500 firms are truly active.  With an average of 2-3 senior investors per firm, there are therefore probably 1,000 VCs that are actively seeking deals and sitting on boards.  The two gut checks on that are:  (1) 1500 new deals get done each year and 1.5 deals per senior VC is the right average and (2) On a bottoms up, geographic basis, there are maybe 500-600 in CA, 100 each in Boston and NY (maybe a bit more in Boston and a bit less in NY), 200-300 elsewhere in the US.

So 10-15% of our entire industry blogs.  And nearly all of the VC bloggers tweet as well.  Think about how extraordinary that is.  Imagine if 50 of the members of congress blogged and tweeted regularly.  Or if 50-75 of the Fortune 500 CEOs.  Or 40-60 of the 400 NBA players.

The amount of transparency and richness of information available to entrepreneurs about the VC world is unprecendented.  This is surely leading to more efficient markets in what many call the most inefficient market of all - the dance of small businesses seeking capital.

When I first started blogging five years ago (inspired by David Hornik, who started VentureBlog in 2003!), I got some funny looks from my peers.  At the time, the thought of VCs revealing our inside secrets and investment strategies was ridiculed. Further, VCs were supposed to be too busy to blog, so the best VCs wouldn't do it as it would take away from their work looking for great deals and managing their portfolio.  Tell that to VC bloggers like David Cowan, Brad Feld, Fred Wilson and other VCs who have 15 year plus great track records.

So why do VCs blog (and tweet) with such frequency?  I can't speak for all 129, but here's why I do it:

1) I love to write.  Simply put, I enjoy words, language and the challenge of expression and composition.

2) Creative expression.  As a VC, I can't exert my creativity in the same way that I did when I was an entrepreneur.  My blog is one productive yet harmless outlet to express my creativity.

3) Educational.  There's an old adage that if you truly want to learn something, teach it to someone else. Forcing myself to explain the VC business to entrepreneurs through my blog has pushed my own thinking and required me to study issues more deeply than I might otherwise have done.

4) Transparent.  The VC business can be an intimidating business to many.  I am an iconoclast at heart.  As a former entrepreneur, I particularly enjoy breaking down barriers and making the VC business more accessible and transparent for others.

Will more than half our industry blog and tweet five years from now?  Stay tuned.