Small Business News
The future of retail is at the intersection of e-commerce and bricks-and-mortars, says co-founder Neil Blumenthal.
When Warby Parker opened a flagship in New York City, many people were shocked. No one expected the digital eyewear disruptor to expand their business to a bricks-and-mortar store.
Speaking at Internet Week this week, Neil Blumenthal, one of Warby Parker's founders, said the move was strategic.
"We believe the future of retail is at the intersection of e-commerce and bricks-and-mortar," he said. "People think it's crazy that we went and signed a 10-year lease in SoHo, next to Ralph Lauren, across the street from the Apple Store. But we have actually been dabbling in bricks-and-mortar for about three years, almost as long as we have had the website open."
When it launched, the start-up offered customers the option to try a number of glasses at home, he explained.
"That in itself was a physical form of sales, but what happened was that within 48 hours of launch, we were overwhelmed by demand and had to suspend the home trial program. And people would call up and say, 'Hey, can we come to your office and try on glasses?' And we would say, 'Uh, we are working out of my apartment.'
"People would come in, and we would lay out the glasses on the dining room table. And we thought it was going to be a sub-optimal experience, but it ended up being a very special experience in that we could build relationships with our customers. They could try on all the glasses. We started to realize maybe there was a place for traditional bricks-and-mortar retail."
The idea for the Warby Parker showroom and pop-ups was born. When those raked in profits, the company decided to open a flagship to anchor the brand. Now, thanks to word-of-mouth and foot traffic, it's become a profit center, driving nearly 50 percent of their sales.
"Our philosophy from the get-go has always been: How can we grow this primarily through word-of-mouth?
"It's about how can we create special moments. When you walk into the store, most people are really surprised, because it doesn't look like any place they have ever been that sells eye glasses."
Seva Call founder Manpreet Singh says what you do matters more than what you wear.
In Silicon Valley, the classic suit and tie has long given way to hoodies and sweatpants. But Manpreet Singh says he's fine with that.
The founder and president of Seva Call, a Potomac, Maryland-based site that connects customers with service providers, tells The Washington Post that long hours and focused attention require maximum comfort. Getting dressed to the nines? Well, that's just a distraction.
“I have no idea how I, or anyone else, got any work done at my old finance job," he recalls. "Today, if we’re all putting our best foot forward professionally, no one cares whether or not that foot is clad in shiny leather wingtips."
To promote a culture where everyone is "comfortable being comfortable," he says Seva Call discourages guests and even job applicants from dressing up. Every minute spent thinking about appearance is time away from putting in work.
"The right balance is one that allows everyone to focus on the work," he continues. "So far, I’ve managed to work with a team that’s smart enough to know where that balance is. And it has nothing to do with whether or not to wear shoes.”
No matter what happens, you should never stop learning, says Matthew Brimer and a panel of entrepreneurs.
Entrepreneurs should think of their education as always being in beta with room for growth and improvement, said Matthew Brimer, co-founder of General Assembly, a start-up academy.
"We have this idea that education is this kind of an adjective that you can apply to yourself after you go through four-plus years experience in your late teens and early twenties," he said in a panel held Tuesday at Internet Week. "So you come out with a college degree and you are educated."
But this doesn't mean we're always prepared. The knowledge needed at different stages of an entrepreneur's life and career evolves over time.
"Rather than thinking of education as this thing that happens in a four year period of your life and then you are over, you are done, we like to think of education as something that should be tracked to both your life and your career, as well as your progress through it, so that it is suited to what you need and when, but is also attached to the world as it exists today," Brimer explained.
Some entrepreneurs learn from watching their peers, chimed in Bridgette Beam, moderator of the panel and Google's global entrepreneurship manager. In her experience, she's learned a lot just by talking with colleagues.
"It starts with asking for help," added Matt French, director of business development for Startup Weekend. "Most entrepreneurs don't know the answer to every question, and surrounding yourself with smart people can help answer them."
Brimer agrees. "Hire people who are better than you at specific things," he urged. "Ideally, as your company grows, you should be the least talented, the least capable and the dumbest person in the room. And if you are not, if you are the most talented, the most capable, and the smartest person in your company, then you are hiring all terrible people."
This might not make entrepreneurs feel like kings of their castles, but it will help them to build more sustainable companies and boost the value of their products.
A recently-acquired founder has some advice on company culture for Marissa Mayer.
So another young tech genius cashes out as Yahoo acquires Tumblr for $1.1 billion. Will Yahoo CEO Marissa Mayer be able to turn it into a profitable venture? I'll leave that to the pundits. I'm going to address what poses the biggest risk to a successful integration: culture. Yahoo and Tumblr have very different company cultures--and if the marriage is not handled correctly, it could mean disaster for everyone involved.
Already social media observers and even Tumblr employees are openly saying to Yahoo: "Leave us alone." Tumblr has built a successful brand and culture by doing things its own way. And while the execs at Yahoo will certainly be touting the Tumblr culture as a major reason they bought the company, make no mistake: they will do whatever is necessary to monetize the investment and satisfy shareholders.
My own company, BerylHealth, was recently purchased by a large public company. I've felt assured Stericycle respects Beryl's culture; the CEO asked me to become the chief culture officer of the combined entity. But I have no doubt that merging into a larger company--let alone scaling Beryl's culture to a multi-billion dollar enterprise--will have its challenges.
Here's the advice I have for Yahoo CEO Marissa Mayer:
Don't say, 'Nothing will change.'
While this could placate employees in the short term, you know it's not true, and you'll lose trust when you inevitably start making changes.
Recognize your new people--soon.
You bought a cool social media site that caters to the younger generation. But you didn't just buy a website. You bought the hearts and minds of 175 people who live and breathe the Tumblr ethos. They are your product.
Get to profitability.
Tumblr will only survive (and Yahoo will only thrive) if it makes money. Tumblr's employees need to know that millions of blog posts a day doesn't ultimately provide a long-term return to stakeholders. No need to apologize for that.
Don't make decisions for the Tumblr team, but with them. These are smart people who know their business. Tumblr's leaders have earned a right to be at the table.
Make known your core values.
Start right now and make sure your employees understand your company-wide mission, vision, and values-- that they are part of something bigger than themselves.
I wish you all the best of luck.
The celebrity chef talks branding, business, and building quality products with Scott Gerber.
Who needs Silicon Valley?
New York startups are proving that Silicon Valley isn't the only place where monstrous tech companies can be made.
In the past twelve months, three tech companies in the New York area have exited for more than $1 billion.
Connecticut-based Indeed, a job search site with a big Manhattan presence, was acquired by Japanese company Recruit Co. Ltd. for an estimated $1 billion. Travel search site Kayak went public then was acquired by Priceline for $1.8 billion.
Now Tumblr, a true New York City company, has been acquired by Yahoo for $1.1 billion in an all-cash deal. It's staying in New York post-acquisition, so the talent won't be departing for Silicon Valley.
The exits mean more capital to spawn companies and retain talent in New York. Tumblr was the result of an exit its founder, David Karp, was a part of in 2006. He was head of product for UrbanBaby when CNET acquired it and he used the capital to launch Davidville, a hub for his creative projects.
Tumblr won't be the last big exit New York sees either. Other valuable companies that are growing quickly include 3D printing company Makerbot and project funding site, Kickstarter.
- By Alyson Shontell
From Delicious to Flickr, Yahoo doesn't have the best track record when it comes to start-up acquisitions. Can Tumblr break the mold?
Founder David Karp made a promise to the Tumblr community Monday in announcing he sold his company to Yahoo for $1.1 billion:
"Our team isn't changing. Our roadmap isn't changing. And our mission--to empower creators to make their best work and get it in front of the audience they deserve--certainly isn't changing."
The 26-year-old Karp may truly believe in Tumblr's ability to maintain its independence from its new parent company, but Yahoo's checkered track record of acquisitions suggests that living up to that promise may be harder than he realizes.
As 37Signals' Matt Linderman wrote in a lengthy blog post a few years back, when it comes to Yahoo's start-up acquisitions, from Flickr to Delicious, history tends to repeat itself.
"Both sides talk about all the wonderful things they will do together. Then reality sets in. They get bogged down trying to overcome integration obstacles, endless meetings, and stifling bureaucracy," Linderman wrote. "The products slow down or stop moving forward entirely. Once they hit the two-year mark and are free to leave, the founders take off. The sites are left to flounder or ride into the sunset. And customers are left holding the bag."
As Linderman points out, the most famous of these fumbles, of course, was the $35 million acquisition of Flickr in 2005. Though founders Caterina Fake and Stewart Butterfield vowed at the time, "We're going to grow and change, but we're in it for the long haul, with the same management and same team," both founders ended up leaving the company in 2008, just a year before Yahoo made deep cuts to Flickr's engineering team.
In 2005, Yahoo also bought the online bookmarking tool Delicious. At the time, founder Joshua Schachter was also optimistic. But just two and a half years later he, too, left the company, later claiming on Quora, "I had been mostly stripped of responsibilities and employees less than a year after acquisition."
Linderman explains how the same sad song played out at Upcoming, an event calendar site that Yahoo shut down in April, as well as MyBlogLog, a blogging network Yahoo acquired in 2007 and terminated in 2011. All of this leads Linderman to ask the fundamental question: "When a company is bought, does it deserve acquisition congratulations or condolences?"
Of course, the obvious difference this time around with the Tumblr deal is Marissa Mayer. Since she became Yahoo's CEO, she's gone on a well-publicized buying spree, snapping up 11 companies in total, many of which appear to have been talent acquisitions. This time, however, the release announcing the Tumblr acquisition bluntly stated Yahoo's promise "not to screw it up." To her credit, Mayer is also working to reverse the damage done at Flickr, announcing a completely overhauled site at yesterday's press conference.
While Yahoo's acquisitions may have left a trail of disgruntled founders in their wake over the years, it remains to be seen whether Karp will be one of them. That $275 million he reportedly made on the deal may keep him happy--at least for a little while.
Ready to kiss your start-up goodbye? VC principal Geoff Lewis offers four ways to tell if you're prime for the picking.
Exit strategies are rarely mentioned by start-ups, yet they are something every business owner needs if they hope to be acquired, said Geoff Lewis, principal at Founders Fund, a venture capital firm.
Speaking Tuesday at Internet Week in New York, he explained, "entrepreneurs and VCs don't often talk too candidly about how to think about getting acquired, because the best start-ups don't actually sell. The truth of the matter is that the vast majority of start-ups will not IPO, and most start-ups are also not suicidal. They do not want to die. Start-ups do not want to go off into the night with no exit whatsoever."
There might not be an incentive to plan, as there's nothing to gain for investors, but entrepreneurs don't want to risk running their company into the ground before the deal has been finalized.
Here are four ways to tell if your company needs a makeover before you try to offload it:
Your old plan isn't working. Perhaps there is a lack of product-market fit or there's conflict within the team. If you no longer believe in the company's vision, perceive a threat from outside, and have no fundraising traction, you'd better grab a parachute and jump.
... Or you don't have a plan. If you've finally hit a wall, with no more restarts and pivots, something is definitely wrong.
Only you see the problems. "Ideally, the outside world thinks that your start-up is doing great," said Lewis. "Preferably crushing it; at minimum, doing OK. People on the outside don't realize the sort of issues or concerns that you have within the company," which might sound good, but could ultimately prove fatal as the cracks begin to show.
You have enough time. Lewis recommends entrepreneurs give themselves at least six months to plot their way out. Your team should have confidence in you as a leader and be able to work through this time.
Among the thousands of graduation addresses given each year, these stand out--mostly for the right reasons.
In 1994, I witnessed perhaps history's most insane commencement addresses, at Wheaton College in Norton, Mass.
Connie Chung, then the anchor of CBS Evening News, offered a stream-of-consciousness recounting of a dream she'd had the night before--not exactly a Martin Luther King Jr.-style aspirational dream--a surreal story about using a portable toilet that turned out to be a zip-up garment bag. (I'm serious. There's a video here.)
Nearly two decades later, I remember that speech distinctly, and it got me thinking about some other graduation speeches that were memorable for better reasons. Here's my list of the most insightful, imaginative, or historical graduation speeches ever given by entrepreneurs and other leaders.
1. Steve Jobs, Stanford 2005
The original iPhone was still two years in the future when Jobs gave this classic speech in which he told three stories: one about connecting the dots, one about love and loss, and one about death.
Jobs talked about the unanticipated, positive results of his having dropped out of college and audited a calligraphy class, of being fired from Apple at age 30, and about being diagnosed with the cancer that would take his life six years later:
Death is very likely the single best invention of life. It is life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true. Your time is limited, so don't waste it living someone else's life.
2. George W. Bush, U.S. Military Academy, 2002
Barely nine months after the September 11 terror attacks, President Bush addressed the West Point class of 2002 and their families--the first class since Vietnam to graduate during wartime.
In your last year America was attacked by a ruthless and resourceful enemy. You graduate from this academy in a time of war, taking your place in an American military that is powerful and is honorable. Our war on terror is only begun. But in Afghanistan it was begun well.
He used the occasion to outline his new foreign policy of preventative war, which led to the invasion of Iraq. (Disclosure: I wrote a book about West Point's class of 2002, in which Bush's speech plays an important role.)
3. J.K. Rowling, Havard 2008
Rowling said she'd been "jobless, a lone parent, and as poor as it is possible to be in modern Britain, without being homeless," before her success with the Harry Potter series. She talked about the benefits of failure--an important lesson for entrepreneurs.
Failure meant a stripping away of the inessential. I stopped pretending to myself that I was anything other than what I was, and began to direct all my energy into finishing the only work that mattered to me," she said. "[R]ock bottom became the solid foundation on which I rebuilt my life.
4. Winston Churchill, Harrow School, 1941
Entrepreneurship is "the pursuit of opportunity without regard to resources currently controlled." By the time Churchill gave this speech, Hitler controlled nearly all of Western Europe. The British were in desperate need of the resources of its quasi-neutral American ally. There's an audio recording here. You might not have known the exact context of Churchill's words, but chances you knew the words themselves:
Never give in. Never give in. Never, never, never, never--in nothing, great or small, large or petty--never give in, except to convictions of honor and good sense.
5. Bono, University of Pennsylvania, 2004
The U2 frontman is an entrepreneur and a social entrepreneur perhaps without peer--or worse, he told the graduates, "the worst scourge on God's green earth: a rock star with a cause."
Except it isn't [a] cause. Seven thousand Africans dying every day of preventable, treatable disease like AIDS? That's not a cause, that's an emergency. And when the disease gets out of control because most of the population live on less than one dollar a day? That's not a cause, that's an emergency. And when resentment builds because of unfair trade rules and the burden of unfair debt, that are debts by the way that keep Africans poor? That's not a cause, that's an emergency... I'm not that interested in charity. I'm interested in justice.
6. Hillary Rodham Clinton, Wellesley College, 1969
Long before she was First Lady, U.S. Senator, or U.S. Secretary of State, Clinton gave a class speech at her own graduation, following then-Sen. Edward Brooke's address. She responded to him, suggesting he was out of touch with a new generation:
We're not in the positions yet of leadership and power, but we do have that indispensable task of criticizing and constructive protest... Part of the problem with empathy with professed goals is that empathy doesn't do us anything. We've had lots of empathy; we've had lots of sympathy...
A few weeks after that, she was featured on the pages of Life magazine, "as a shining example of the Class of '69."
There are many others I could cite: Jeff Bezos at Princeton University in 2010, Theodore Geisel (better known as Dr. Seuss) at Lake Forest College, 1977, David Foster Wallace at Pomona College in 2005, Stephen Colbert at Knox College the following year, Conan O'Brien at Harvard in 2000 and Kurt Vonnegut, never. (Vonnegut was credited in an Internet rumor for having given this speech, which turned out in fact to have been an old newspaper column.)
Who did I forget? What other memorable graduation speeches have you seen or heard?
Great leaders tend to be funny in a particular way, new research shows.
"They did not take me in the Army. In the event of war, I'm a hostage." --Woody Allen
Most people wouldn't associate the famously self-deprecating director of Annie Hall with inspirational leadership. But maybe they should. Researchers at Seattle University recently presented undergraduates with a series of vignettes in which a company boss introduced a new project manager, Pat, to the team. All the vignettes were structured similarly until it came to the punch line.
The first story ended with the boss saying, "I am so glad that Pat took this job, despite knowing all about us!" The second ended with, "I am so glad that Pat took this job, despite knowing all about you!" The third ended, "I am so glad that Pat took this job, despite knowing all about me!"
Almost categorically, undergraduates rated the boss in the third story--the self-deprecating boss--as a more likable, trustworthy, and caring leader.
The three anecdotes correspond to three different humor styles: group-deprecating, aggressive, and self-deprecating. Project managers who used self-deprecating humor tested highest for transformational leadership, defined by motivational qualities such as likability, trust, individualized consideration, and intellectual stimulation.
Self-deprecating humor enhances perceptions of leadership ability because it tends to minimize status distinctions between leaders and followers.
"Everyone makes mistakes," says study co-author Colette Hoption, a management professor at Seattle University. "Admitting them frankly can help you build solid relationships with your team."
Not sure how to apply big data to your small business? Check out these tips and tools.
I've written in the past that big data is a big deal, and in the words of marketing technology specialist Robert Cole, "too bad the vast majority of business leaders have no clue what it is, how to use it, or why it's important to their businesses."
So what is it, exactly, besides this year's hottest marketing buzzword? I conducted some "little data" brain-picking with Cole.
Why is the concept of big data so ignored or misunderstood by business leaders? What's the No. 1 frequently asked question about big data you hear?
Cole: The concept of big data is simple when put in the context of three "V's:" volume, velocity or variety. That's information that is too big, too fast, or too weird to fit in a conventional database. IBM, which knows a lot about big data, has added a fourth (and most important) "V:" veracity. With research indicating one-third of business leaders don't trust the information they use to make decisions, the most important aspect of big data is how it is used to gain greater insight and make better decisions.
What should small- and medium-sized businesses look for in big data tools they can embrace right now?
RC: While the tools within reach of small businesses now may not be as sophisticated as those accessible to big business, they all capture and organize a vast amount of valuable data, often in real time. In many cases, they create value by aggregating data from a variety of data sources and translate it into actionable information. Without such tools, most businesses would have no way to capture, let alone store, organize or provide analytics on data sourced from websites, promotional campaigns, loyalty programs, sales teams, store traffic or revenue transactions. Adding the ability to track this data over time and against competitive benchmarks represents an even greater challenge.
Can you give me some examples of big data tools that are accessible, relevant, and useful for small and medium-sized businesses?
RC: Sure, here are some great tools that provide access to extensive insights without outta-sight prices.
- Google Analytics (Free) Your website can tell you more than you probably think if you know what to look for.
- SumAll (Free/Beta)--For online businesses that rely on customer engagement and shopping carts and which need to pull the information together into a dashboard to benchmark and compare data for sales, discounts/promotions, site visits, fans & followers, customer revenue mix and charges across platforms like Amazon, PayPal, eBay and Shopify.
- SizeUp (Free)--Competitive benchmarking that even the U.S. Small Business Administration taps to provide comparison information on customers, competitors and suppliers, plus where to advertise.
- Yurbi ($300/year)--Business intelligence that creates real-time reports, dashboards, and metrics connecting together customer, inventory, support and transaction data sources without the need for custom programming.
- FiveStars ($65/month & up)--Provides businesses with a customized loyalty program with access to customer profiles, targeted messaging and point of sale integration.
- InsightSquared ($99/month & up)--Sales analytics for B2B businesses seeking to increase sales team productivity, understand activity ratios and sales cycle length and improve opportunity conversion.
- Euclid Analytics ($200/month per sensor/24,000 sq ft)--Through the use of sensors tracking smartphone wi-fi signals in brick and mortar locations, this solution records foot traffic, captures new versus repeat store visits, frequency rates and visit duration.
What's the biggest pitfall to avoid when utilizing big data?
RC: These tools all provide great value, however, like any tool, they are designed for a purpose and may prove to be useless if applied to the wrong task. Start with the questions that if answered, increase engagement, grow sales, improve efficiency or reduce costs. Then use the available data to look for relationships between various metrics and performance.
The goal is to gain insights and make better decisions that are based on information derived from reliable data sources. Big data is only a tool--it's not an objective.
Readers weigh in on the challenges of balancing collaboration and getting "real" work done.
Our recent post about the challenges that introverts face in the modern workplace--particularly, the trend toward open plan work spaces--garnered some interesting feedback and a few questions from readers.
One reader talked about the challenges he faces in his office, which features an open "bullpen" of desks for sales personnel, including executives. "As a self-admitted introvert," he said, "I find the area extremely fun and energetic, though very, very unproductive. What have you found to be a suitable balance?"
That's a great question. We have a similar open space in our Chicago office. I (Bill)--the introvert in my partnership with Karl--find it hard to work in this open space, so I usually retreat to a conference room to get work done. Understanding the potentially mixed message from a boss who "hides" in a conference room all day, I balance this in a couple of ways:
- - I try to remind myself to walk the halls a few times a day to say hi to everyone, maybe even challenging someone to a game of ping pong.
- - I accept that I'm only 80 percent productive at best on those days I'm in the office, and therefore plan my work accordingly.
Needless to say, if I were designing an office space to fit my needs, it might be less open and have more private space. However, I think on balance our office meets the need of most of our team, with plenty of places to retreat to and plenty of open space. We have three meeting rooms, two full-sized offices and three "phone booth" desks, all with closing doors. Only on our most crowded days do we find we run out of space.
We asked our reader how he achieves balance. His response:
"At the office, I've similarly just accepted that I'll be less productive or retreat to the conference room when I need to put my head down and get 'thought required' work done. It often leads to somewhat longer days at the office, but such is life in the world of a younger company."
We also heard from Vanessa Piccinini of Dotted Line Communications, who guided us to a recent study on workplace "productivity killers"conducted by Ask.com and Harris Interactive.
Some key points from the online survey:
- - 86 percent of workers prefer to work alone to achieve maximum productivity, suggesting that perks like foosball tables and bean bag lounges may boost morale, but they don't always drive efficiency.
- - Just 27 percent of workers prefer an "open room" or "newsroom" setting, and 61 percent cited noisy co-workers as a top workplace distraction.
- - Nearly one-quarter (24 percent) say they spend more time in meetings talking about work than actually doing it.
- - 46 percent say that, even though they sit close to their co-workers, they mostly communicate with them through e-mail, IM, or phone.
- - 38 percent indicated they would rather do unpleasant activities--such as taking on more work or sitting next to someone who eats loudly--than sit next to their boss.
These are some interesting results, especially the last one. As the "bosses," we'll make a point of sitting next to each of our team members some point soon to identify the 38 percent--and find ways to make them more comfortable!
Five factors that make the difference between a life of fulfillment and a life filled with regret.
Contrary to popular belief, achieving some sort of balance between work and play is achievable. You actually have more control over it than you think if you know how to go about it.
Here are five factors that can make the difference between a life of fulfillment and a life filled with regret.
1. There is an optimum balance.
Here's the theory: If you work too hard and completely miss out on life, you'll be miserable. If you have too much fun and don't make enough money, the result's the same. Those are the extremes. Somewhere in between is an optimum point where you work hard enough, make enough money, and still have fun.
That optimum point is different for everyone--but it does exist.
2. It's all about your goals...
If your goals are to have a fulfilling career and a rich family life, you should be able to pull it off. Really. That's what I call a reasonable balance. If, on the other hand, you really want to make it big out there, you'll probably have to sacrifice on the personal side to achieve that. Then there's the third option: If your goal is to party hard and work only as much as you have to to skate by, don't expect to park a Ferrari at your mansion.
Look at it this way: Life is all about tradeoffs.
3. ...and how hard you're willing to work to achieve them.
Some people want to have it all. If your goals are that aggressive, then you'll probably have to work long and hard and be disciplined about it to achieve them. This is the aspect of work-life balance where people generally fall down. Like it or not, goals don't mean a thing if you aren't willing and able to deliver the goods.
4. It helps a lot if you love your work.
Ever hear of working dogs? They're breeds that are all about the work. Boxers, shepherds, rottweilers, and collies are generally at their best when they're working.
I must have been a working dog in another life because I'm just like that. It's still work, but I really enjoy doing it. It's a big part of my life and who I am. And because I worked hard to achieve aggressive goals when I was younger, now I get to try my hand at lots of different things.
5. You don't have to be on 24×7.
It's really hard these days to resist the persistent tug to check email and Twitter and answer the phone or a text when you get one. But that, in my opinion, is more about giving in to instant gratification, the need for attention, and the addictive qualities of our communication overloaded culture than it is about having to be on 24×7.
Everyone I know who seems to have a pretty comfortable and balanced life has a relatively disciplined approach to that sort of thing. They don't let the gadgets, tools, and toys get the better of them.
The bottom line is this. Seeking balance in life is highly subjective. It's like searching for a movie you'll like. You won't know how you feel about it until after you've seen it.
Instead of waiting until the end of your life to find out if you've achieved balance, think about these five factors and come up with a combination that works for you. You have more control than you think.
We all strive to be our best. Here are seven traits to make your entrepreneurial journey heavenly.
Last month, I shared how to avoid the 7 deadly entrepreneurial sins so you could innovate without fear. But entrepreneurs, and those who are entrepreneurial in their roles, aspire to live life beyond mere survival and safety. They strive for something bigger and more meaningful.
So here are descriptions of the 7 Heavenly Virtues for you entrepreneurial types to help you reach for the clouds.1. Purity
Temptation is abundant in the entrepreneurial world. Most people are looking for shortcuts: a faster, easier way to take the market, get funding, lock down a client. Most shortcuts, if even effective for the long run, can come with a price. The best businesses are built on a solid foundation of integrity. Their business models are backed by research and tested to prove viability. Above all, the ethical choices you make will impact the respect and trust you retain in business for decades to come. Those who misrepresent to gain fast traction are doomed to follow in the footsteps of Enron. Better to be a Jeff Bezoz than a Kenneth Lay.2. Temperance
Exuberance is a trait of many entrepreneurs and CEOs. They love to get excited and get people around them excited as well. But the leader who gets excited all the time about every little thing creates excitement fatigue. Followers begin to lose interest because they can't distinguish between actual major milestones and missteps. A leader who shows self-restraint can pick the moments to generate enthusiasm. Moderation will help sustain energy that builds over time.3. Charity
One doesn't have to give away their fortune to be charitable. Charity can come in other forms than money. The best and most respected leaders give their time, their energy, their thoughts, and their life lessons. But they do it now, they do it often and they do it with intent. They make a concerted effort to engage with those who have not yet achieved, and they do it selflessly.4. Diligence
As one of my personal core values, the idea of diligence has helped me benefit from wonderful opportunities as it has protected me from bad ones. Entrepreneurial people are ready to jump at a moment's notice, but those who can comfortably step back, do their homework, and deliver with consistency will grow bigger and better every time.5. Patience
Patience may be the hardest virtue for entrepreneurial types to master. Once a vision is finished in your head, you want it to exist tomorrow (or at least by next week.) But the best success is built over time. A business or process cultivated carefully over time will grow bigger, be more competitive, and last longer. Plant your seeds today and enjoy helping them grow. And if you feel anxious along the way, at least learn to manage your impatience productively.6. Kindness
I have said many times that nice people will sabotage you in business. But as a New Yorker, I appreciate that you can be brutally honest and direct while still being kind. In fact, the kindest move you can often make is to save people from wasting their time and energy on a dead end campaign. Beyond that, a smile and a little tasteful humor at no one's expense will go along way to endear you to others.7. Humility
Entrepreneurial people, born or made, are gifted leaders. It takes strength, power and a healthy ego to lead people into the unknown. But the act of being humble, best demonstrated though self-awareness and acknowledgement of others, is sure to have people following you to great heights for all the right reasons.
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"Managers rely on focus groups--a dozen people riffing on something they know little about--to set strategies. And yet companies won't experiment to find evidence of the right way forward."
Duke University-based behavioral economist Dan Ariely tells a story about what he calls a "typical case" of experiment phobia. A consumer products company asked him to design an experiment that would help it choose the best pricing model and subsequently agreed to his proposal to create multiple websites with varied offers to discover what customers responded to best.
But then, predictably, the company got cold feet. "I've often tried to help companies do experiments, and usually I fail spectacularly," Ariely says. In this case, the company's leaders got squeamish because the experiment would require treating some customers unfairly (by charging them more than others).
The company's team asked Ariely if, instead of levying any mistreatment, he might just tell them which pricing approach would be smartest. "I told them I was willing to share my intuition, but that intuition is a remarkably bad thing to rely on," Ariely says. "Only an experiment gives you the evidence you need." The company called the experiment off.
Ariely finds this behavior amusingly irrational. "Companies pay amazing amounts of money to get answers from consultants with overdeveloped confidence in their own intuition. Managers rely on focus groups--a dozen people riffing on something they know little about--to set strategies. And yet companies won't experiment to find evidence of the right way forward."
He also says this behavior is entirely predictable. Companies shy away from experiments for two big reasons:
1. "As the people at the consumer goods firm pointed out, experiments require short-term losses for long-term gains. Companies (and people) are notoriously bad at making those trade-offs."
2. "There's the false sense of security that heeding experts provides. When we pay consultants, we get an answer from them and not a list of experiments to conduct. We tend to value answers over questions, because answers allow us to take action while questions mean we need to keep thinking. Never mind that asking good questions and gathering evidence usually guides us to better answers."
With 2014 revenue projects nearing $1 billion, analysts expect a public offering. Turns out, Twitter is putting all the right wheels in motion to IPO in a year.
Dick Costolo, Twitter's chief executive, has been relatively coy about the prospect of his company going public.
In nearly every public interview, Costolo deflects the question, saying--in July 2012, for instance--that he "likes being private." More recently, in January 2013, Costolo said that an IPO was "not necessarily inevitable." And Jack Dorsey, Twitter's co-founder and a current board member, went so far to say that Twitter is "not even thinking" about an IPO. That was April 2013.
"Of course, no one can say precisely what they'll do," says Santosh Rao, the managing director and head of research for Greencrest Capital, a New York City-based boutique advisory firm that follows emerging companies. The firm has carved a niche for itself covering high-growth tech firms; it recently predicted Tableau's successful IPO. "And of course, they'll deny it. But we expect an IPO in mid-2014."
Greencrest's 2014 Twitter IPO projections are based on a variety of metrics, including recent management changes, partnerships with major brands, user growth, and, most importantly, revenue growth.
Although Twitter does not publicly disclose revenues, Greencrest estimates the company is on track to earn more than $605 million in revenue by the end of this year. In 2014, the firm projects Twitter will have revenue of nearly $1.1 billion. EMarketer, a market research firm which also follows the company, has made similar projections. (It believes Twitter will earn $1.33 billion in revenue by 2015.)
Most importantly, Greencrest estimates the company's valuation will reach $11 billion by 2014. By then, Rao believes the company will have all of the building blocks in place for a successful IPO.
The Tech-IPO Market Isn't Hot--But It's Warming Up
Twitter's decision to file won't happen in vacuum, of course. The market matters--and last year's abysmal IPO performance left a bad taste in the mouths of plenty in Silicon Valley, and beyond.
But David Ethridge, the senior vice president and head of the capital markets group at NYSE Euronext, believes that while the first quarter of 2013 has been a relatively quiet period for tech IPOs, the market is poised for a rebound.
"The market is good for IPOs," Ethridge asserts. "You're seeing rational pricing."
Ethridge also believes that tech CEOs are generally waiting longer than ever before when deciding to go public--which may explain why Twitter is taking its time.
"A company needs the ability to project to results," he says. "It sounds simple--but it's hard." Although he said he can't comment specifically about Twitter, Ethridge believes that once the company has fully outlined the various elements of its business model, it will be ready to go.
"They're going to want to make sure that their model pieces are there so they can project to the analyst community," he says. Right now, he says, "it seems like they have a lot of good counsel from the standpoint of the board."
Follow the Leaders
From a personnel standpoint, Costolo is putting the right people into place.
In early May, Twitter announced it had tapped Cynthia Gaylor, an investment banker and former managing director at Morgan Stanley, to be the company's head of corporate development.
The hire didn't offer any conclusive evidence for an immediate IPO, but Gaylor, a Wharton graduate, has the résumé of someone you'd want to have in-house if your company was moving toward a public offering. According to her LinkedIn account, Gaylor "has advised clients on over 150 transactions representing over $100 billion in transaction value," including acquisitions at tech companies such as Facebook, Zynga, Netflix and Linkedin.
Gaylor isn't the only hire who might indicate Twitter was taking an IPO more seriously. In December, Costello shuffled up top management--he promoted Mike Grupta, a former finance executive at Zynga (who helped take the company public in Decemeber 2011) to be the company's chief financial officer, while moving Ali Rowghani from CFO to COO.
While Costolo has been updating his C-suite, there's also been a steady push for recruiting top engineers. There's been rumors of massive Google-poaching, too--AllThingsD went so far as to speculate "hundreds" have been recruited.
Although it's tough to estimate precisely how many Googlers were recruited to work at Twitter, and the company did not respond to multiple requests for comment for this article, some LinkedIn searching and sorting reveals it's pretty clear that those rumors aren't completely unfounded: there are about 250 current employees at Twitter that have previously worked at Google, a healthy percentage of the company's estimated 1,500 employees.
"While C-level personnel changes are important, Twitter has also been quietly hiring experienced tech executives--mostly from Google--for other departments," Rao writes in a January 2013 Greencrest report on Twitter, which was made available to Inc. "The hiring of these seasoned executives suggests a possible positioning for an initial public offering in the next 12 to 18 months, in our view."
Big Indicator: Revenue Growth
Unlike plenty of other tech firms, Twitter makes actually makess money, and does so in several ways.
In October 2011, the company first introduced Promoted Tweets, which are monetized on a cost-per-engagement basis, which means impressions are free, but a only brand pays when someone clicks, retweets, replies to, or favorites a Promoted Tweet.
There are also new revenue streams developed through Promoted Trends and Promoted Accounts, which, as Greencrest points out, "allow a greater potential for increased ROI numbers for advertisers, thereby increasing interest in Twitter's Promoted Suite for marketers."
Twitter is also winning where others are failing--eMarketer estimates that by 2015, 60 percent of the company's revenue will be generated on mobile.
In January, Twitter announced it was selling $80 million of company stock to give early employees a bit of liquidity. This, in turn, limited the amount of trading in secondary markets, and essentially acted as a pressure valve for an IPO. Once a private company reaches 500 shareholders, they're required to disclose more information. ("Without offerings like this one to BlackRock, the only way to get employees liquidity is to IPO," noted TechCrunch. "That hasn't necessarily been productive for companies like Facebook, Zynga, and Groupon who got chewed up by the public market.")
Given a choice, Rao believes that Twitter would indeed to prefer to stay private--echoing Costolo's sentiments from last July. But the company's raised more than $1 billion in venture capital--and those investors need a way out, even if it takes a bit longer than expected.
"They've learned to not make the same mistakes [as other companies]," says Rao. "Facebook had telegraphed the IPO, and there was so much hype. These guys would rather wait--and then boom, just get it out."
Feel proud of your 70-hour weeks? You may as well boast about working while drunk.
Just how deep does the lionization of long work hours run in the entrepreneurial community? Pretty deep, according to Forbes writer Michael Simmons. When he started asking around Silicon Valley if 70-hour work weeks were worth it, he noticed founders turned cagey.
"Talking publicly about the topic brought fear of judgment," he wrote. "Two of the people I interviewed said that things like sharing vacation photos was a taboo as investors might see them. People who start ‘lifestyle’ businesses and who talk about balance and stress are often put into a bucket of people who aren’t serious about business."
In fact, taking breaks or getting a good night's rest are viewed as signs of weakness. Some even exaggerate how many hours they put in, according to time use expert Laura Vanderkam.
This valorization may be popular among entrepreneurs, but it has Julia Kirby, an editor at the Harvard Business Review, hopping mad. So mad, in fact, she wrote a strongly-worded blog post, "Change the World and Get to Bed by 10:00," a must-read for any professional.
Kirby includes a chart every business owner should take a look at. Getting drunk and not sleeping enough have roughly the same impact on performance, and neither are good. If you're coming to work consistently sleep-deprived you're basically functioning drunk. Take a look:
Kirby argues we need a social movement against sleep deprivation much like the cultural shift against smoking. Whether Hollywood producers will heed her words is an open question, but as a business owner in possession of a pillow and an alarm clock, you can take action today simply by going to bed at 10pm.
Or take things a step further, as Kirby suggests, and encourage your team to do the same. "If you're a corporate leader, you have the reasons and you have the means to change today's dysfunctional culture around sleep."
Do you think our cultural attitude toward sleep is unhealthy?
It's all about the future at this stage in a company's life. But to back out a $1.1 billion valuation for Tumblr, you have to be really, really optimistic.
As all the world knows, Yahoo is paying $1.1 billion to acquire social media platform Tumblr. That’s a very nice exit for investors who sunk in about $125 million, according to Business Insider. But was it a fair price for Yahoo?
A number of people besides Marissa Mayer seem to think so. Matt Mullenweg, founder of Automattic and founding coder of Wordpress thinks the company could be worth 10 times what Yahoo paid. Paul Buchheit, a Valley entrepreneur (FriendFeed) told the New York Times, “If a company has a 1% chance of becoming a $100 billion company, then it’s worth about $1 billion.”
Let’s run the numbers.
Finance 101 says the value of a company lies in the annual cash flow it generates, to be profitably reinvested in the company or returned to shareholders via dividends. To turn cash flow into valuation, analysts divide the annual cash flow by the company’s cost of capital. (Think of cost of capital as a measure of a company’s riskiness; the higher the risk, the higher the cost of capital.) A company with a stable $10 million cash flow and a 10% cost of capital would thus be worth an estimated $100 million.
What doesn't get you to $1 billion
In 2012, Tumblr generated $13 million in revenue and $25 million in expenses. Losing $12 million a year obviously doesn’t earn you a $1 billion valuation. But Business insider says Tumblr’s goal for 2013 is to generate $100 million in revenues with $40 million in expenses. Since Tumblr is a risky investment, you might assume its cost of capital is 20% annually. Then the $60 million cash flow divided by 20% gives you a $300 million valuation. That’s still only about 25% of what Yahoo paid.
But what if the company can eventually generate $1 billion revenue and have the same 34.4% cash margin that Facebook now enjoys? (Just for perspective: to hit the billion mark in five years would take a 140% compound annual growth rate in revenue; to do it in 10 would take 54% a year growth.) With a successful revenue model, Tumblr’s cost of capital could decline to, say, about 10% annually. Thus, the $344 million cash flow would yield a valuation of about $3.44 billion, or more than three times this week’s price for Tumblr.
It's all in the expectations
Moreover, investors would presumably not expect that Tumblr’s cash flow would stop growing at $344 million. They’d expect it to keep going, which means they’d put an even higher value on each dollar of current cash flow. If investors rated growth prospects for this future Tumblr as optimistically as they do the outlook for Facebook (whose stock trades at 33 times operating cash flow), then Tumblr would be worth $11.4 billion.
Now let’s look at the Buchheit methodology: What would it take for Tumblr to be worth $100 billion? Well, based on Facebook’s market valuation, Tumblr would have to have to generate $8.8 billion in revenue, $3.03 billion in annual operating cash flow, and have the same growth prospects currently in Facebook’s $62.4 billion valuation.
The winner's curse
Assumptions are everything in valuing any early stage company. I would say the probability that Tumblr would have been the next $100 billion market cap company are significantly lower than 1%. My hunch is that management would not have sold themselves to Yahoo for $1.1 billion if they were on target to generate $60 million operating cash flow this year. It's what economist Richard Thaler calls the winner's curse: All you know for sure after an acquisition is that you paid more than other potential buyers thought the company was worth.
The prove the wisdom of this purchase, the managements of Tumblr and Yahoo will have to turn 18 billion monthly page views into revenue with a very healthy cash flow margin and a white hot growth rate. Yahoo CEO, Marissa Mayer, posted on her Tumblr blog, “we promise not to screw it up.” That’s an excellent mission statement if ever I heard one.
Do you and your employees do these three things? In other words, are they as good at their jobs as Brenda is at hers?
I believe in life-long learning. I also believe you can learn something from almost anyone. The key is to extract the wisdom from the wood chips and apply it to your own life.
For years, I've had a favorite waitress named Brenda. I hate to wait for anything, but I'm happy to wait for a seat in her section because I think she actually improves my digestion. I always learn something from her, which, given the fact that restaurants are the ultimate customer-service industry, is hardly surprising. This week I learned three important things from her. So pay attention.
1. Repeat After Me
Brenda has her own way of taking orders. She repeats everything that I say right back to me, word for word. There's a curious comfort in that, which is very reassuring. How many times have you had some waiter stand there while you're reciting your very complicated choices and not write anything down or repeat a single thing? Did you really feel confident that you were going to get what you ordered, or were you just a little anxious that maybe Wally the Waiter didn't have the world's greatest memory, and that your potatoes were coming with peppers whether you liked it or not? That’s not exactly the warm and fuzzy feeling that makes for return visits.
The most important part of Brenda’s process isn’t that she always gets my order right. Her mimicry sends a specific and powerful message. Not only am I being listened to; I am being heard. And I am being heard by someone who actually cares about me and about getting my order right.
The ineffable feeling of being “important” and cared for is the absolute heart of great customer service. Getting the order right is basic execution. Getting the listening part of the process correct is even more important. It’s that old cliché: I don’t really care how much you know until I know how much you care.
We’re too often distracted when we're supposed to be listening. We're texting or typing. We're multi-tasking or checking our monitors for new email. And we're sending a very clear message to the person talking to us. It says, "I might seem to be listening, but you're not really being heard because my mind and my attention are obviously elsewhere.” Nothing could be worse for your people, your customers, or your business.
If your customers don’t think you’re concerned about them or listening to them, they won’t be customers for long. And it’s even worse internally. If your people bring you problems or concerns and you seem too busy to listen or to be bothered, they’ll conclude that you don't care. They'll stop coming to you and, far more critically, they’ll stop caring themselves. When your people stop bringing you problems, you know you have a real problem.
2. Do What You Can Do
Brenda doesn't own the restaurant, so she doesn't set the prices or the portion sizes. She doesn't determine the daily specials and she can't guarantee that they've got my favorite fruit on a particular morning. Sometimes there are things simply beyond her control, like a new cook or busboy who just can’t get things right. And she better not ignore the "no substitutions" rule, which apparently is the Eleventh Commandment in the restaurant business.
Given the many things that can get in the way of delivering the kind of service that makes a difference to her customers, she has developed her own simple strategy. She does what she can.
That may sound simplistic and somewhat random, but it’s not. This isn't some arbitrary process. It isn't a case of flouting the fat cats or trying to get away with something. It's good business to take care of your friends--the regulars--who represent the recurring foundation of the business. That's exactly what she does.
Say you don’t want the green beans that come with the meat loaf. But no substitutes are allowed. Well, she doesn’t substitute anything. She just piles on extra potatoes and lets you know it's a double portion. Not so good for the waistline, but great for making sure you know you're special. She can't change the rules, but she works her magic with the ladle. She works with what she has control over and she does what she can. It shows, and, believe me, it matters. This is her own individual solution. When you incorporate this kind of flexibility and empowerment into your entire organization, you become Nordstrom’s--a business with the epitome of empowered employees and a great place to shop.
3. Don’t Worry, Be Happy
Every job turns out to be a direct reflection of the amount of time, effort, commitment and passion you put into it. There are really no boring jobs; just people who are bored with their jobs because they lack the energy, attitude and imagination to make something great out of every day.
The best bosses I know make it their business to find the pumped-up people in their places and make sure that their excitement, enthusiasm and energy is shared and communicated throughout the organization.
What I love about Brenda is that she absolutely refuses to let anyone be the “bad” in her day. Even on her worst day, she’s a smile waiting to happen. Her enthusiasm is authentic and completely contagious.
It’s about attitude and respect. It says that her job may not be rocket science, but that she takes great pride in how she does it and she puts herself entirely into the process. She expects you to appreciate that, and to respect her effort and commitment to doing the best job she can do every day. And, unless you’re completely unconscious, you do.
If you use any of these words, consider this your start-up slang intervention.
Ninja / • noun, a person with advanced skills. As in, "Dave is our secret ninja; he's the best coder we've ever hired." Is this a real company or a 6-year-old's fantasy? Why not throw teenage, mutant, and turtle in there while you're at it?
Value prop (or proposition) / • noun, the reason a customer would want to buy your product. As in, "I don't see the point of another crowdfunding site. What's the value prop? Another thing customers value? Plain English.
Killing it / • verb phrase, to perform successfully. As in, "Our team is really killing it right now. We hit 10,000 users two months after launch." All you are killing is my desire to have a conversation with you.
Productize / • verb, to turn a custom feature into an independent product. As in, "We took that process and productized it." Sorry to break it to you, but no one knows what you are talking about. Everyone is just nodding to be polite.
Rockstar / • adjective, outstandingly good. As in, "We're looking for a rockstar developer to join our team." OK, but don't be surprised when one of them trashes a hotel room at South by Southwest.
Grind / • verb, to work very hard. As in, "Our team is just grinding it out." Wow, sounds like a great sweatshop you've got going there! Sign me up!
Inflection point / • noun, a moment of dramatic change in the life of a start-up. As in, "We're growing 10x, month over month, and we haven't even hit our inflection point yet." Let me guess--you have a chart with a hockey stick on it.
Stealth / • adjective, secret. As in, "Ben won't talk about the stealth start-up he's working on. All I know is that it has something to do with the cloud." Are you protecting missile codes or launching a company? Careful; I think your phone may be bugged.