Politics – A Third Rail

At the risk of creating a feedback “maelstrom”, I want to discuss “politics” – well, not politics per se but the discourse of politics as it pertains to the workplace. The recent presidential election has generated a significant amount of controversy across the entire political spectrum. And, many people have felt compelled to use a variety of communication channels to express their political points of view. We should applaud, embrace, and cherish the fact we live in a democratic society and respect and revere individual free speech rights. However, there can be consequences for expressing those rights. And, while many of us have been trained to respect employment law regarding religion, gender, and sexual issues, I have found very little guidance regarding how to manage the discussion of politics in the workplace – a topic which can be divisive and hostile. I make the following comments regarding discussing politics at
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The Interview

If you sit down with a number of HR executives and ask each of them which questions companies should ask candidates during the interview process to ensure they select the “best fit” person, you will likely hear a spectrum of answers. Over time, companies tend to develop their own processes and/or techniques (e.g. psychographic testing) to suss out whether or not a candidate will succeed in their organizations. Even technology is beginning to play a role. A new company has emerged – AIngel spun out of NYU – that is using AI to assess candidates, even entire management teams, based upon their social media posts, LinkedIn profiles, and any other digital “exhaust” to predict their ultimate success. No permission is required by the candidates/teams nor do they need to know they are being profiled. AIngel uses its ML-based algorithms tp compare an individual’s traits against others known to be successful
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Wildcat Venture Partners & The Traction Gap Framework

Well, I know it has been quite some time since my last post – some of you have emailed me asking what’s up. As you will soon read, I have had a few things on my plate over the past year and a half since InterWest Partners made the decision to go forward as a healthcare only venture firm. That decision set in motion many cascading events for me and my partners. First — I found myself going through some of those “stages of death” emotions — anger, denial, and finally acceptance as I realized my time with the firm would be involuntarily drawing to an end as I am not a healthcare investor. When I joined InterWest on June 6, 2006 — 10 years ago —  I thought it would be the last “thing I would do”, that I would retire from the firm with 25 years on the operating side and
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In Pursuit of Becoming a Platform

StartupsI focus exclusively on investing in software startups that build products used by businesses and business users. My current and past portfolio includes infrastructure companies such as Aria Systems and Splice Machine as well as application software companies such as Doximity, MarketoStellar Loyalty, and Workday. Most of these use a SaaS business model.

My investments are often very early stage – Seed and Series A – with either just a product/market concept (e.g. we invested in Marketo when it was just an idea, no code or customers; the same with Doximity and Stellar Loyalty) or prior to a Minimally Viable Product (MVP) such as the case with Aria Systems and Splice Machine. This involves a lot of risk because these companies have significant hurdles to overcome — incomplete teams, lack of product/market fit and/or a repeatable go-to-market process. The trade-off for that risk is ownership. We can secure 20%+ ownership in these companies so that
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Bend Polytechnic Academy (BendPoly) – A Bridge Over Troubled Waters

BendPoly_Logo_F-BigIn the 20th century, when the US was largely based upon a manufacturing economy, American schools provided two educational tracks and career paths for students: higher education and vocational.

Higher education focused on delivering a broad general education to those students who had the aptitude and desire to pursue management or professional careers. Vocational schools provided students with the skills needed by the vast number of industrial manufacturing companies at the time: carpentry, welding, plumbing, electrical, and others. Today, however, the US – and global- economy has been transformed to be primarily service-based. According to a 2014 Bloomberg Business report, “Worldwide, services account for 70 percent of value added and…that’s true in some developing countries, too.” The majority of manufacturing jobs that still exist have been shipped outside the US and are unlikely to return – at least not at the scale prior American generations experienced. Many
New Grad Job Market
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The Rise of RevTech and EmpTech

Machinery-ManufacturingMy investment partner at InterWest, Doug Pepper, and I co-authored an article on TechCrunch this weekend titled  “A New Revolution Modernizes The Revenue Supply Chain“.

In it, we discuss a new class of enterprise software applications that we see emerging in the Front Office and Back Office. These new applications are not replacing first generation applications per se (e.g. CRM, ERP, HCM).

Instead, they are using the transaction data generated by first generation applications  to provide real-time business insights at “the moment of value” — when a decision needs to be made by an individual, manager or executive.

They are also doing something very interesting — they are embedding collaboration and workflow into the fabric of the applications and leveraging mobile for anywhere, anytime computing across the enterprise.

These new applications, we believe, may be the foundation of a step-function increase in global employee and company productivity.

We have given these data-driven enterprise applications the labels of

Continue reading "The Rise of RevTech and EmpTech"

The Rise of RevTech and EmpTech

Machinery-ManufacturingMy investment partner at InterWest, Doug Pepper, and I co-authored an article on TechCrunch this weekend titled  “A New Revolution Modernizes The Revenue Supply Chain“.

In it, we discuss a new class of enterprise software applications that we see emerging in the Front Office and Back Office. These new applications are not replacing first generation applications per se (e.g. CRM, ERP, HCM). Instead, they are using the transaction data generated by first generation applications  to provide real-time business insights at “the moment of value” — when a decision needs to be made by an individual, manager or executive. They are also doing something very interesting — they are embedding collaboration and workflow into the fabric of the applications and leveraging mobile for anywhere, anytime computing across the enterprise. These new applications, we believe, may be the foundation of a step-function increase in global employee and company productivity. We have given these data-driven enterprise applications the labels of
Continue reading "The Rise of RevTech and EmpTech"

The Rise of RevTech and EmpTech

Machinery-ManufacturingMy investment partner at InterWest, Doug Pepper, and I co-authored an article on TechCrunch this weekend titled  “A New Revolution Modernizes The Revenue Supply Chain“.

In it, we discuss a new class of enterprise software applications that we see emerging in the Front Office and Back Office. These new applications are not replacing first generation applications per se (e.g. CRM, ERP, HCM). Instead, they are using the transaction data generated by first generation applications  to provide real-time business insights at “the moment of value” — when a decision needs to be made by an individual, manager or executive. They are also doing something very interesting — they are embedding collaboration and workflow into the fabric of the applications and leveraging mobile for anywhere, anytime computing across the enterprise. These new applications, we believe, may be the foundation of a step-function increase in global employee and company productivity. We have given these data-driven enterprise applications the labels of
Continue reading "The Rise of RevTech and EmpTech"

The Missing SaaS Metric – Customer Retention Cost

A few months ago, on a quiet Sunday, I was reading through some of my board decks getting prepared for the upcoming board meetings.

A common theme among all of those decks was a section on churn and the impact it was having – both positively and negatively – on my portfolio companies. Some of those companies, fortunately, are experiencing negative churn as their customers increase the footprint of the portfolio company’s technology.

I got to thinking about this issue.

We have a significant number of metrics we use to measure top of the funnel health for our companies that use a SaaS business model – Customer Acquisition Cost Ratio (CAC Ratio), Customer Lifetime Value, Churn, etc. These are tried, tested and proven metrics management teams and investors use to evaluate how well a company with a recurring revenue model is performing.

However, with churn  a critical component of the SaaS model, I asked myself, “Why don’t we have a common metric to measure the health of the bottom of the funnel?”

Key questions are:

  • Shouldn’t we know how much we are spending to retain a customer?
  • At what point should we “fire” a customer?
  • Should that point vary by industry or type of customer?
  • When should we parachute in our “customer success” teams?

It seemed to me that if we have a Customer Acquisition Cost metric, shouldn’t we have a Customer Retention Cost (CRC) metric and what would be the elements we would use to measure the CRC and CRC ratio?

So, I put together a bunch of thoughts on what should go into the calculation of such a metric and sent that over to one of our portfolio companies – Totango.

Totango provides a customer success platform. Software companies and others use their platform to determine whether or not a customer is deriving value from a software product. This enables customer success teams to “parachute in” and help a customer derive value from the vendor’s software product and mitigate a key issue associated with churn.

Given they are “in the business of reducing churn”, it seemed to me only natural that they take my initial concepts, flesh them out,  and launch the CRC  and CRC Ratio metrics into the industry as a whole.

I am happy to report they have done that with a fantastic white paper on the subject. I would encourage anyone dealing with churn/retention, to read this paper and add to the conversation.

The CRC and CRC Ratio are not metrics to be owned by any one individual or company. They need to be owned by the industry and your contributions are welcome.

 

The Missing SaaS Metric – Customer Retention Cost

A few months ago, on a quiet Sunday, I was reading through some of my board decks getting prepared for the upcoming board meetings.

A common theme among all of those decks was a section on churn and the impact it was having – both positively and negatively – on my portfolio companies. Some of those companies, fortunately, are experiencing negative churn as their customers increase the footprint of the portfolio company’s technology. I got to thinking about this issue. We have a significant number of metrics we use to measure top of the funnel health for our companies that use a SaaS business model – Customer Acquisition Cost Ratio (CAC Ratio), Customer Lifetime Value, Churn, etc. These are tried, tested and proven metrics management teams and investors use to evaluate how well a company with a recurring revenue model is performing. However, with churn  a critical component of the SaaS model, I
Continue reading "The Missing SaaS Metric – Customer Retention Cost"

The Missing SaaS Metric – Customer Retention Cost

A few months ago, on a quiet Sunday, I was reading through some of my board decks getting prepared for the upcoming board meetings.

A common theme among all of those decks was a section on churn and the impact it was having – both positively and negatively – on my portfolio companies. Some of those companies, fortunately, are experiencing negative churn as their customers increase the footprint of the portfolio company’s technology. I got to thinking about this issue. We have a significant number of metrics we use to measure top of the funnel health for our companies that use a SaaS business model – Customer Acquisition Cost Ratio (CAC Ratio), Customer Lifetime Value, Churn, etc. These are tried, tested and proven metrics management teams and investors use to evaluate how well a company with a recurring revenue model is performing. However, with churn  a critical component of the SaaS model, I
Continue reading "The Missing SaaS Metric – Customer Retention Cost"

The Corporate Organizational Structure of SaaS

orgstructures_WendelFranks_226x150

Recently, I had someone ask me how they might think about the organizational structure of their SaaS startup.

Here are some lessons I learned over my 25 years working on the operating side in what started out as small, private start ups (Oracle and Siebel Systems ) but turned into large companies – along with my experience working with many early and mid stage SaaS companies as an investor.

  1. Who the CEO elects to have as direct reports tells customers, employees, business partners, and shareholders what matters to her/him and what she/he believes is critical to the company to succeed. So, choose your reports carefully as you are signaling to a lot of people what is important to you.
  2. More layers between the CEO and the people who execute the business model can slow down decision making and reduce the speed of execution of the company. I have found that lackluster execution is what usually kills most start ups. CEOs are usually CEOs because they have excellent intuition and the ability to analyze data and make good decisions quickly. Relying upon others to “interpret” data and report on it may slow down and introduce sub-optimal decision-making (subjective decisions by lower level staff that may not be as experienced as the CEO or have ‘political’ agendas).
  3. The people who are responsible for executing the business model should be direct reports to the CEO. For a SaaS business model, this means the following:
    1. VP Marketing – responsible for the initial creation of revenue through demand generation (top of the funnel) and “future” revenue; revenue from future sales periods.
    2. VP Sales – responsible for delivering “in period” revenue via direct sales – inside and field sales
    3. VP Support – responsible for ensuring the product works as marketed/sold
    4. VP Service – responsible for implementations – if critical to the success of converting “contracted” MRR to “realized” MRR as projects are delivered
    5. VP Products – responsible for specifying a complete product that meets market requirements
    6. VP Engineering – responsible for building and delivering a complete product
    7. VP Customer Success – a “new” exec position critical to the SaaS model responsible for the bottom of the business model funnel – I wrote about this role previously in my blog . This role is responsible for making sure customers are happy and using the product every day (1 customer success rep for every $1M ARR is best practice). New products such as Totango are this function’s new “system of record” and the CEO’s window on usage metrics which is critical for renewals and reduced churn. You spend a lot of $ to acquire customers (CAC ratio), you need to make sure they stay as customers or the SaaS model falls apart.
    8. VP Finance – among many things, responsible for the
      Continue reading "The Corporate Organizational Structure of SaaS"

The Corporate Organizational Structure of SaaS

orgstructures_WendelFranks_226x150 Recently, I had someone ask me how they might think about the organizational structure of their SaaS startup. Here are some lessons I learned over my 25 years working on the operating side in what started out as small, private start ups (Oracle and Siebel Systems ) but turned into large companies – along with my experience working with many early and mid stage SaaS companies as an investor.

  1. Who the CEO elects to have as direct reports tells customers, employees, business partners, and shareholders what matters to her/him and what she/he believes is critical to the company to succeed. So, choose your reports carefully as you are signaling to a lot of people what is important to you.
  2. More layers between the CEO and the people who execute the business model can slow down decision making and reduce the speed of execution of the company. I have found that lackluster execution is what usually kills most
    Continue reading "The Corporate Organizational Structure of SaaS"

The Corporate Organizational Structure of SaaS

orgstructures_WendelFranks_226x150

Recently, I had someone ask me how they might think about the organizational structure of their SaaS startup. Here are some lessons I learned over my 25 years working on the operating side in what started out as small, private start ups (Oracle and Siebel Systems ) but turned into large companies – along with my experience working with many early and mid stage SaaS companies as an investor.
  1. Who the CEO elects to have as direct reports tells customers, employees, business partners, and shareholders what matters to her/him and what she/he believes is critical to the company to succeed. So, choose your reports carefully as you are signaling to a lot of people what is important to you.
  2. More layers between the CEO and the people who execute the business model can slow down decision making and reduce the speed of execution of the company. I have found that lackluster execution is what usually kills most
    Continue reading "The Corporate Organizational Structure of SaaS"

Why “Organizational Behavior” Was My Most Important Collegiate Course

I didn’t know it at the time. In fact, when I took it, I thought it was a complete farce.

Maslow’s “Hierarchy of Needs”? Are you kidding me?

I was majoring in Engineering and taking calculus, physics, chemistry…you know, the serious stuff meant for serious students. But, to graduate within some reasonable amount of time (where “reasonable” was defined by my parents), I needed some additional elective units. So, I decided to take one of the only classes that wasn’t already filled and would satisfy the requirements for me to graduate; this turned out to be a class called,  “Organizational Behavior”.

I looked up the description of Organizational Behavior which read something like this:

“The study of the way people interact within groups. Normally this study is applied in an attempt to create more efficient business organizations. The central idea of the study of organizational behavior is that a scientific approach can be applied to the management of workers. Organizational behavior theories are used for human resource purposes to maximize the output from individual group members.” Source: Investopedia.com

“Oh my god!”, I thought. “Is there any way I can get out of this boring, irrelevant class? Is this a legitimate/real subject?”.

No, at the time there were no suitable alternatives.  I couldn’t get out of the class and expect to graduate at a time before my parents had threatened to cut me off. So, reluctantly and grudgingly, I went through a semester of Organizational Behavior and learned about the theory of what supposedly motivated individuals, groups, etc. to generate maximum team performance.

When the course was finally over, I was ecstatic and turned my textbook in as fast as I could for 25% of the amount  I originally paid – grateful that someone would buy back such a useless piece of $hi%.

What I didn’t realize then, as a college student with no real world work experience, is that I was a complete moron – at least temporarily.

At the time, I believed that the success of my career was going to be tied to my individual work effort and results. And, while that was certainly true for the first few years, I was offered a managerial position fairly quickly since I didn’t seem to screw things up too badly — and I accepted because this is where I believed more stock options and a better salary awaited me.

But, I quickly realized I needed to figure out a way to get things done through others or I was going to fail, and fail badly. Suddenly, I became highly motivated to highly motivate a team of people. I started reading a lot of books about teamwork, etc. which I recognized as essentially more modern treatises of my

Continue reading "Why “Organizational Behavior” Was My Most Important Collegiate Course"

Why “Organizational Behavior” Was My Most Important Collegiate Course

I didn’t know it at the time. In fact, when I took it, I thought it was a complete farce.

Maslow’s “Hierarchy of Needs”? Are you kidding me? I was majoring in Engineering and taking calculus, physics, chemistry…you know, the serious stuff meant for serious students. But, to graduate within some reasonable amount of time (where “reasonable” was defined by my parents), I needed some additional elective units. So, I decided to take one of the only classes that wasn’t already filled and would satisfy the requirements for me to graduate; this turned out to be a class called,  “Organizational Behavior”. I looked up the description of Organizational Behavior which read something like this:

“The study of the way people interact within groups. Normally this study is applied in an attempt to create more efficient business organizations. The central idea of the study of organizational behavior is that a scientific approach can

Continue reading "Why “Organizational Behavior” Was My Most Important Collegiate Course"

Why “Organizational Behavior” Was My Most Important Collegiate Course

I didn’t know it at the time. In fact, when I took it, I thought it was a complete farce.

Maslow’s “Hierarchy of Needs”? Are you kidding me? I was majoring in Engineering and taking calculus, physics, chemistry…you know, the serious stuff meant for serious students. But, to graduate within some reasonable amount of time (where “reasonable” was defined by my parents), I needed some additional elective units. So, I decided to take one of the only classes that wasn’t already filled and would satisfy the requirements for me to graduate; this turned out to be a class called,  “Organizational Behavior”. I looked up the description of Organizational Behavior which read something like this:

“The study of the way people interact within groups. Normally this study is applied in an attempt to create more efficient business organizations. The central idea of the study of organizational behavior is that a scientific approach can

Continue reading "Why “Organizational Behavior” Was My Most Important Collegiate Course"

Fusing Collaboration Into Enterprise Applications – Enabling the “Real” Social Enterprise

I, along with many of you, have been watching the evolution of enterprise internal collaboration products/companies such as Yammer, Chatter, Jive, and Cubetree over the years.

I was an early investor in Cubetree which was acquired by SuccessFactors and then became part of SAP when SAP acquired SuccessFactors a short time later. SAP has since renamed Cubetree to SAP Jam and it now serves as the backbone to SAPs collaboration strategy.

These products are supposed to mitigate – eliminate ? – the need for email within the enterprise and dramatically improve internal collaboration offering far easier and superior ways to capture and share information v. email/spreadsheets, etc.

However, if you can get the product managers and/or CEOs of these product/companies to speak candidly off the record, with rare exception, the adoption level of these products has been far less than the creators and the companies that purchased these solutions had hoped for.

Why? I have a simple thesis. Collaboration within the enterprise usually takes place among people who share a common goal/objective. And, more typically, the collaboration revolves around a project or a process that people need to execute. The problem with current collaboration solutions is that they are not tightly integrated into the fabric of the applications that functional teams use to perform the processes they need to execute to get their work done.

If I am part of a marketing team in a B2C company, I want and need to be able to collaborate with my outside ad agencies, legal department, graphic designers, product managers, account teams when I create a new ad for one of my product lines. I want an application that actually “embeds” collaboration into the process with workflow, role-based authentication; not a separate collaboration product that sits outside the application and operates orthogonal to the process.

If I am trying to generate a forecast, I want to be able to collaborate with my team members – my sales engineer, the product team, legal team  – regarding product availability, pricing, terms, etc. I don’t want a separate collaboration product that forces me to remember to communicate with my team members outside the forecasting application.

If I am part of an engineering team and I want to discuss whether or not a certain feature should be linked into the next build process, I should be able to collaborate with product management, sales, legal, etc. within the development applications I am using, not be forced to use a separate application outside the application.

The minute I am required to communicate/collaborate outside the process application, email becomes a much easier mechanism and something I am far more comfortable using. It has the added benefit of working both internally and externally to the enterprise. And, that

Continue reading "Fusing Collaboration Into Enterprise Applications – Enabling the “Real” Social Enterprise"

Fusing Collaboration Into Enterprise Applications – Enabling the “Real” Social Enterprise

I, along with many of you, have been watching the evolution of enterprise internal collaboration products/companies such as Yammer, Chatter, Jive, and Cubetree over the years.

I was an early investor in Cubetree which was acquired by SuccessFactors and then became part of SAP when SAP acquired SuccessFactors a short time later. SAP has since renamed Cubetree to SAP Jam and it now serves as the backbone to SAPs collaboration strategy. These products are supposed to mitigate – eliminate ? – the need for email within the enterprise and dramatically improve internal collaboration offering far easier and superior ways to capture and share information v. email/spreadsheets, etc. However, if you can get the product managers and/or CEOs of these product/companies to speak candidly off the record, with rare exception, the adoption level of these products has been far less than the creators and the companies that purchased these solutions had hoped for. Why?
Continue reading "Fusing Collaboration Into Enterprise Applications – Enabling the “Real” Social Enterprise"

Fusing Collaboration Into Enterprise Applications – Enabling the “Real” Social Enterprise

I, along with many of you, have been watching the evolution of enterprise internal collaboration products/companies such as Yammer, Chatter, Jive, and Cubetree over the years.

I was an early investor in Cubetree which was acquired by SuccessFactors and then became part of SAP when SAP acquired SuccessFactors a short time later. SAP has since renamed Cubetree to SAP Jam and it now serves as the backbone to SAPs collaboration strategy. These products are supposed to mitigate – eliminate ? - the need for email within the enterprise and dramatically improve internal collaboration offering far easier and superior ways to capture and share information v. email/spreadsheets, etc. However, if you can get the product managers and/or CEOs of these product/companies to speak candidly off the record, with rare exception, the adoption level of these products has been far less than the creators and the companies that purchased these solutions had hoped for. Why?
Continue reading "Fusing Collaboration Into Enterprise Applications – Enabling the “Real” Social Enterprise"