Things to Consider When Designing Your Startup’s Logo

How should you think about designing your startup’s logo? The mark symbolizes your business. It’s destined to be ubiquitous. Business cards, ads, hoodies, mobile apps, water bottles, even custom sneakers may bear the logo.

In the most recent episode of 99% Invisible, Tom Geismar relates the creation story of the Chase logo. The Chase logo was one of the first abstract corporate marks, one without text. Since then, Geismar has created many iconic marks including Xerox, PBS, Mobil.

Geismar offers three basic criteria for evaluating a logo:
1. Appropriate - must fit your startup’s culture and its ecosystem
2. Distinctive - must be unique enough to be distinguished from the competition
3. Flexible - must be easily scaled to smaller sizes and different media

In the interview, Geismar shares a few other important points. Not every business should use an abstract mark. The blue striated octagon works because of Chase’s

Continue reading "Things to Consider When Designing Your Startup’s Logo"

The Impact of Blockchain on SaaS

Much of the conversation today about crypto is about Bitcoin and currency. But that’s myopic. Soon, we will be talking about how crypto will change the software world. In fact, many founders have already started that pursuit. More than 30% of the initial coin offerings (ICO) in 2017 target developers and businesspeople with their products.

The numbers are still small. B2B crypto companies raised about $400M of ICO dollars in 2017. B2D companies commanded $1.2B. This distribution reflects the early stage of the ecosystem.

The blockchain is a technical advance. Consequently, it should initially appeal to developers more than their business counterparts. The data reflects this.

Enterprise software has three layers: infrastructure, platform and application. Today, much of the effort is focused on infrastructure and platforms. Within the 200 ICOs I analyzed, there are tens of next-generation infrastructure players and a twenty or more platforms-as-a-service.

Over time, the blockchain’s Continue reading "The Impact of Blockchain on SaaS"

Clarity of Purpose – The Competitive Advantage of Focus

20 years ago, a newly minted billionaire worked in his office. Fluorescent lights, a dingy purple carpet, and a CRT monitor resting on a door. Not a desk - those were too expensive - a door supported by 4x4s, brackets and wood screws. In his 60 Minutes profile, he drives around in a Honda Civic. His rationale? “It’s a perfectly good car.”

The founder of course is Jeff Bezos.

The photograph and the interview highlight an attribute I greatly admire in Bezos: clarity of purpose. From the very first shareholder letter, Customer Obsession is the first priority.

This simple focus requires doing three simple, but hard things.

First, a founder must decide to manage a company with a particular principle. The founder must choose it, stick with it, and reiterate it over months, years and decades.

Second, the founder must operate the business with that principle. The Continue reading "Clarity of Purpose – The Competitive Advantage of Focus"

Expanding Your Time Horizon To Scale Your Startup

When a startup takes form, the first weeks and months and years are spent furiously. The team assembles itself. The lightbulb illuminates. It is formed and reformed again and again as customers supply feedback. Eventually the team hews the right product. The startup raises capital. Then the team returns focus to hiring, evolving the product, and closing customers. However, continuing this way isn’t the path to huge scale. There’s a critical step missing.

In the early days, the founders plan each week as it comes. Customer meetings, product releases, investor pitches. Three yards and a cloud of dust. Get up. Fight for another three yards. Every damn day.

Suddenly, the business is working. The founders have hired department heads, who manage employees. At some point, those managers manage managers too. There’s enough breathing room to go on vacation. When the founders return, the company has carried on in their absence. Continue reading "Expanding Your Time Horizon To Scale Your Startup"

The Best Bit of Advice on Writing

This is one of the best pieces of advice I’ve collected about writing. Put each sentence on a separate line when you write.

When we read, we hear a rhythm. There is a rhythm to the words.

And when we read, we look to find that rhythm, which pushes us through the end of a sentence, so if I write a really long sentence, and the reader isn’t expecting it – like this one – the reader will find it really hard to follow and understand where I am going. And if I keep writing really long sentences, I’m going to exhaust the reader, because there’s no place to stop and take a breath and think about what it is that I have written. Whew!

If I write a short sentence, you can breathe. But. Short staccato sentences. Aren’t. Good either.

Separate lines help you see your reader’s journey. Make Continue reading "The Best Bit of Advice on Writing"

Reorganizing Your SaaS Startup’s Organizational Structure to Optimize the Customer Lifecycle

Recently, I wrote about customer/revenue operations, an idea that seems to be taking hold at many different SaaS companies. Instead of optimizing the performance of each individual step of the customer lifecycle, customer operations optimizes it over the entire journey. This is a fundamental change in the way a business manages its customers, and it’s now starting to be reflected in the organizational structure of SaaS startups

Two advances in thinking have led to the idea of customer operations. First, customer journeys are not linear. The classic funnel that we all picture in our minds isn’t the way that customers buy anymore. A customer may register for a SaaS product’s free trial, try it, contact customer support and decide not to buy at the expiration of the trial. But they return 90 days later and sign a contract for $90,000. Or a buyer might attend a few events hosted Continue reading "Reorganizing Your SaaS Startup’s Organizational Structure to Optimize the Customer Lifecycle"

How to Identify a SaaS Market that Machine Learning Will Disrupt

In SaaS, machine learning has become an essential component to many different products. Whether it’s automating responses to inbound sales queries, identifying expense reports for audit, or surfacing anomalies in data, machine learning improves workflow software. To date, most software imbued with machine learning reduces costs rather than increase revenues.

Why is this the case? Because machine learning is focused on efficiency gains.

First, to train a machine learning model requires large amounts of data. Repetitive workflow processes produce this data. With enough data, a machine learning model can be applied to automate the workflow. For example, it’s straightforward to build machine learning models to automatically answer password reset questions.

Second, automation reduce costs because they eliminate the need to hire additional people to handle more work. A bot replies to login reset questions with an automated response in a link to a knowledge base, freeing customer support reps to Continue reading "How to Identify a SaaS Market that Machine Learning Will Disrupt"

Yearning for the Vast and Endless Sea

“My goal is to make you love rowing.” That’s how my first rowing started. I had never picked up an oar or stepped into a racing shell before. With 100 other freshman men, I had assembled at the boathouse along the maple and conifer lined Connecticut River. I’ll never forget those words.

I had played many sports before. In every other case, the focus, the mission, the motivation had always been to win. This was different.

Over the next four years, I came to understand why our coach had started the freshman season this way. Rowing is a brutal and arduous sport.

After the 3, 2, 1 count, two eight men teams and one coxswain - who steers the boat and motivates the crew - place their oars in the water and pull with all their might. As the boat leaves the starting point and lurches into the water, Continue reading "Yearning for the Vast and Endless Sea"

Yearning for the Vast and Endless Sea

“My goal is to make you love rowing.” That’s how my first rowing started. I had never picked up an oar or stepped into a racing shell before. With 100 other freshman men, I had assembled at the boathouse along the maple and conifer lined Connecticut River. I’ll never forget those words.

I had played many sports before. In every other case, the focus, the mission, the motivation had always been to win. This was different.

Over the next four years, I came to understand why our coach had started the freshman season this way. Rowing is a brutal and arduous sport.

After the 3, 2, 1 count, two eight men teams and one coxswain - who steers the boat and motivates the crew - place their oars in the water and pull with all their might. As the boat leaves the starting point and lurches into the water, Continue reading "Yearning for the Vast and Endless Sea"

Ten Year’s Worth of Learnings About Pricing

Last week, I shared a presentation with an executive team at a large public SaaS company on everything I’ve learned about pricing. Here’s a summary of the frameworks and theory that I’ve aggregated over a decade of investing in startups.

Why do we set prices? Setting aside the important reasons of generating revenue and maintaining solvency for a business, there are many other reasons to set price. Price reinforces brand because price telegraphs whether a product is a premium product or a value product. Price differentiates products in the market and can be used as a go-to-market strategy. Underprice the competition to gain share. There are many others too.

There are four components to pricing: 1. Strategy: what is the goal of the price? 2. Philosophy: how does the company price relative to costs? 3. Structure: what is the pricing rubric? 4. Positioning: how best to communicate the price?

Strategy
Continue reading "Ten Year’s Worth of Learnings About Pricing"

Ten Year’s Worth of Learnings About Pricing

Last week, I shared a presentation with an executive team at a large public SaaS company on everything I’ve learned about pricing. Here’s a summary of the frameworks and theory that I’ve aggregated over a decade of investing in startups.

Why do we set prices? Setting aside the important reasons of generating revenue and maintaining solvency for a business, there are many other reasons to set price. Price reinforces brand because price telegraphs whether a product is a premium product or a value product. Price differentiates products in the market and can be used as a go-to-market strategy. Underprice the competition to gain share. There are many others too.

There are four components to pricing: 1. Strategy: what is the goal of the price? 2. Philosophy: how does the company price relative to costs? 3. Structure: what is the pricing rubric? 4. Positioning: how best to communicate the price?

Strategy
Continue reading "Ten Year’s Worth of Learnings About Pricing"

An Era of Fundamental and Massive Change – The Capital Markets Innovation of the ICO

In December 2017, the amount raised in ICOs nearly equaled the amount raised by Series A investments globally. The technology innovation catalyzed by Bitcoin and Blockchain is creating many multibillion dollar economies quickly. The ICO market today bears many similarities to the dotcom era. Startups can raise hundreds of millions of dollars on an idea. Twenty years ago, the idea had to be sketched on a napkin. Today, the protocol must be detailed in a white paper. But the ability to access huge amounts of capital at a similarly nascent stage is identical.

Like the dotcom era, most of the companies raising huge sums in ICOs will not endure. But they are a critical part of the evolution and maturation of the market and the technology, because these businesses will further the ecosystem to finding valuable applications of distributed ledgers and databases.

In the early 2000s, the billions of dollars Continue reading "An Era of Fundamental and Massive Change – The Capital Markets Innovation of the ICO"

7 Predictions for SaaS in 2018

Below are 7 predictions about the startup software ecosystem. How many of them do you agree with?

  1. The tax holiday for repatriation creates one of the most active M&A environments of the past ten years. The repatriation holiday is part of the new tax plan. It permit companies to bring US dollars held abroad (from software sales in other countries) back to the US at a lower tax rate than before. The scale is enormous. Apple could repatriate $252B, Cisco $65B, Google $55B. That cash could be used for dividends, share buy backs and acquisitions. Several landscape altering SaaS acquisitions will come to fruition because of cash availability from repatriation and because there are enough public SaaS companies at scale to add material revenue and market cap to buyers. Some ideas: Google buys Salesforce. Microsoft buys Workday. Oracle buys ServiceNow. There are now 5 publicly traded software companies worth more Continue reading "7 Predictions for SaaS in 2018"

Jettisoning the Assumptions of Last Year

Snowflake Image by Alexey-Kljatov.jpg

There’s a crisis in the scientific academic world. It’s called the Replication Crisis. Scientists have found that they cannot replicate the results published by many scientific studies. The same thing is happening in the world of business.

Over the last 15 years I’ve several hundred business books, and I’ve written one. Across those 15 years, one of the most interesting is a book called The Management Myth, which traces the history of management science back to its less than solid origins. The book illuminates the history of scientific management and Taylorism, and supplies evidence that much the original data underpinning these theories was fabricated. I was curious if this was a broader trend, and it may be. I found other cases.

More recent examples include Scientific American [debunking the theory behind Jim Collin’s work, Good to Great. A team of academics failed to reproduce Kahneman’s work on social priming Continue reading "Jettisoning the Assumptions of Last Year"

Premoney vs Postmoney – Which is a Better Technique for Negotiating?

When negotiating your next fundraising round, should you talk valuation in premoney terms or postmoney terms? Premoney is the valuation before the investment, employee stock option pool (ESOP) expansion, debt-to-equity conversion and investment. Postmoney is the value of the business after all that.

As an investor, postmoney is simpler. Despite the improved simplicity, I don’t think the industry is going to move to postmoney anytime soon.

Why are postmoney conversations simpler? Because the valuation of the business is fixed. The value of the business doesn’t float from variables like pro-rata participation, ESOP expansion and debt-to-equity conversion.

Existing investors, also called insiders, often have negotiated for pro-rata rights. Pro-rata is the right but not obligation to invest in future rounds to maintain the same ownership. Lots of pro-rata rights means a larger round size.

ESOP expansion also increases pro-rata investment.

With the rise of debt as a seed investment vehicle, debt-to-equity Continue reading "Premoney vs Postmoney – Which is a Better Technique for Negotiating?"

Meetings Shouldn’t Be Boring

A friend suggested that I read the Five Dysfunctions of a Team over the weekend. Though I’m passionate about business books, I rolled my eyes. I had seen this one on best seller lists for a long time, and never thought it would have much to offer. I admit my book-cover bias was wrong. The author has a counterintuitive assertion. Meetings shouldn’t be boring.

The book is a fable, describing the journey of a new CEO, Kathryn, who takes the helm of a struggling high-growth startup. She brings her management team on a series of off-sites. During one of those conversations, she says:

Let me assure you that from now on, every staff meeting we have will be loaded with conflict. And they won’t be boring. And if there is nothing worth debating, then we won’t have a meeting.

I’ve been in about 15 years worth of meetings and I Continue reading "Meetings Shouldn’t Be Boring"

Managers Must be Insane to Brainstorm in Groups

“Evidence from science suggests that business people must be insane to use brainstorming groups.” That’s a shocking statement. Adrian Furnham, a professor of organizational and applied psychology at University College London, said it. It turns out it’s completely true.

Participants in interactive brainstorming groups rated their performance quite favorably…[and] felt that interactive group brainstorming was more productive than individual brainstorming…However, actual performance data [showed] …interactive groups generated fewer distinct ideas.

Social Influence processes in group brainstorming

We feel better and more productive in group brainstorming sessions, but in reality, we produce fewer ideas and of fewer quality. In addition to the paper above, these results have been confirmed many times.

The researchers and authors of the paper proposed the theory that three forces impinge group brainstorming productivity:

  1. Production blocking: in a group, each idea must be processed serially, one-by-one. When brainstorming alone, people process in parallel. This enables much Continue reading "Managers Must be Insane to Brainstorm in Groups"

How Quickly Does Headcount Scale in the Fastest Growing Software Businesses?

How quickly do the fastest growing software companies build their teams? The answer is incredibly quickly. In fact, this data bolsters the notion that management team’s top priority is recruiting, especially after the business has reached product market for and capitalized itself well.

Above, I’ve charted the headcount growth rate for 10 of the fastest growing software companies in recent history. I’ve normalized the years for when all the businesses were roughly at the same headcount - fewer than 50 people. This is a proxy for when the business established product market fit.

There is quite a bit of variance in the growth rates of each of these companies. The fastest grower scales to more than 600 people in 30 months. Another business nearly surpasses 1000 employees and four years.on the other side of the coin, one of these businesses takes four years to reach about 200 employees. The

Continue reading "How Quickly Does Headcount Scale in the Fastest Growing Software Businesses?"

The Parallel Between Cryptocurrency and Continentals

There’s a parallel between cryptoassets today and the British colonial period predating the US. In the late-1600s, colonies began to print their own money. Today, we’re seeing many startups coin their own money, creating an explosion in the number of new (crypto)currencies.

States printed colonial money to pay debts to citizens. During tax collection times, the state accepted citizens’ bills as payment and retired the bills from circulation. Citizens would pay each other with these bills. They could also exchange them across state lines, but not at 1:1. Each state’s bills had a different exchange rate.

Colonial money didn’t have a central policy body, a federal reserve equivalent. In addition, they were poorly managed. Many of the states issued too much paper money, causing inflation and eventual collapse in confidence of these currencies.

In 1775, the US government issued $241M worth of Continentals, the currency of the Revolution, to finance Continue reading "The Parallel Between Cryptocurrency and Continentals"

An Antifragile Thanksgiving

I’m grateful for all the entrepreneurs who have spent time teaching me how to build their companies. Over these past few days, I have been reading the book Antifragile written by Nassim Taleb. In the book, he writes about many provocative things, but the one that sticks out with me this holiday is about innovation, and it harkens back to the original title of this blog that I started to write nearly 7 years ago: ex post facto.

Taleb entertains with his irreverence and his depth of thought. He images a new academic institution catering to birds - the Harvard-Soviet Department of Ornithology. In this department, a collection of 60-year-old professors dressed in black robes, dictate to a group of birds on the principles of flight in a form of English that is full of jargon interlaced with equations. It’s laughable to think birds would learn to fly this way. Continue reading "An Antifragile Thanksgiving"