Where’s Your Operating Plan?

August 29, 2011 Leave a comment

Every business needs a 12-month operating plan, even startups at the earliest stages.  The only major difference between a startup Operating Plan (OpPlan) and a mature OpPlan is that the startup OpPlan will inevitably be wrong.  Then why do it?  Because it represents a stake in the ground, your living metrics, targets and milestones so that when targets are either missed or exceeded, it forces an internal review of “why” and then “how” to make adjustments to keep the business performance on track.  I’m going to focus here on the importance of OpPlans for early stage businesses.

First, what is an OpPlan for an early stage or emerging business?  Probably the most common mistake I see is equating the OpPlan to the 3-5 year financial projections spreadsheet that every startup creates to raise money.  While these projections are incredibly useful and contain many of the assumptions that go into the OpPlan, the OpPlan requires an extraction of key assumptions in written form that is easily communicated to everyone in the organization and certain external stakeholders (investors, Board).  Specifically, the 12-month OpPlan contains the following – think of it as an outline for a powerpoint presentation to share with employees:

  1. Statement of Vision, Mission and Strategy.  At the highest level, these should be really clear and posted on a few walls in the office.  How can you know what to do today if you don’t know where you are going and why?
  2. Core 12-month Objectives.  This should be 5 or fewer major objectives for the business that, if achieved, will define success over the next 12 months, at least based on what you know now.  They ought to be completely consistent with point #1 above.  These are not activities or tasks but rather major objectives (ie, “Achieve 5% market share in our category”).  They don’t describe the “how”, just the “what” and since there’s only 5, key stakeholders (Board, investors) should view the achievement of these objectives as a highly successful month/quarter/year.
  3. Key Initiatives and Priorities.  For the current quarter and in order to meet the Objectives, what are the key Priorities and Initiatives that the team will focus on?  We are now breaking down the Objectives in #2 into a manageable set of Initiatives, answering the “how”.  This list becomes the ultimate arbiter when resource conflicts arise (and they will).  Completion of these Initiatives should absolutely result in performance against the Key Metrics (discussed below).  These corporate Key Initiatives then drive more detailed plans within each functional area – Sales and Product priorities drive the product roadmap, which in turn helps to prioritize the Technology, Analytics, Support and Marketing/PR initiatives.
  4. Key Metrics, Target Values and Accountability.  For each Objective in #2, what must be measured (Metric) and what are the Target Values for each Metric that ensure the Objectives are met?  And who is responsible for achieving each Target Value?  Important to track Metrics monthly, understand why there are variances and, most important, take decisive action to address under-performance.  Examples of corporate metrics might be # customers, average revenue per customer, visitor conversion to sale %, hire 10 people, etc.  Ultimately, each functional area (sales, tech, marketing, support) will have their own set of Metrics and Targets that roll up into achieving the overall corporate Targets.
  5. Financial Projections / Budget.  To include Revenue and Expense targets and assumptions.  There are really two methods for determining Revenue projections – “Top Down” and “Bottoms Up” – and I think its important to have a view into both because they often tell different stories.  Top Down approaches begin with understanding the potential market size, assuming some penetration or market share to determine Revenue growth.  Bottoms Up, on the other hand, starts with understanding the sales cycle, product development complexity and available capital to determine a more “reasonable” picture of Revenue scale.   Another way to think about it – Top Down shows “what’s possible” in a world of few constraints and Bottoms Up is more in line with “what’s achievable” being more realistic about resource constraints.  But having a view into both allows for some analysis to answer the question “What additional resources would it require (money, people, technology) to scale the business faster?”

Finally, I highly recommend creating a “One Sheet OpPlan”, a 2-sided but one page document that has Key Initiatives and Priorities for the current period (quarterly) on the front and Key Metrics and Target Values on the back.  This document gets distributed to ALL employees so everyone is fully informed and aligned on what drives success and, more importantly, how individual efforts tie directly or indirectly to certain Objectives that drive that success.

This important process and document really forms the basis for instilling a Performance Based Culture within the organization by tying individual performance and compensation to company Objectives.

Detractors may say that this is all too much structure and process for a startup where you are simply trying to get the product right and achieve some customer traction.  I would agree that putting too much effort into planning when you are a team of 2 or 3 is probably not the highest and best use of time.  However, while the need for this level of thought into the business may vary, certainly by the time you are taking external capital into the business its important that everyone is aligned on where the business is going and what defines success in the near term, even if success is defined by “get 2 paying customers”.  Even an objective this simple requires sales, a product, technology reliability and scale, support, design, analytics, etc. such that each department has a list a mile long of things they can’t get accomplished due to resource constraints.  A well constructed OpPlan helps to coordinate priorities across departments and keeps everyone’s eyes on the prize.

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My Favorite Free iPad Apps

August 24, 2011 Leave a comment

I’ve been increasingly using my iPad since the applications are becoming comprehensive enough to almost be a PC replacement.  There are still two areas where the iPad falls way short of replacing my laptop – 1) directory based file access and integration with email attachments (I’m surprised DropBox hasn’t solved this issue or maybe they have?) and 2) “power” work sessions, times when I need to do a lot of typing or editing and need a larger screen.

In any case, here are some of my new faves right now:

Evernote.  Comprehensive notes application that syncs across platforms and devices.  This is an incredibly powerful tool that now has an ecosystem of plugins to make it even more useful for topically capturing and archiving just about anything.  Be sure to download “Ron’s Evernote Tips”.

Skype for iPad.  Finally, Skype’s application for iPad is out, enabling the iPad2 as a chat and video phone platform via WiFi.

FlipBoard.  Centralized news and social media aggregator with a unique interface, turns everything into a page-turning magazine layout, including your Facebook and Twitter feeds.

Zite.  Similar to FlipBoard, but becomes more personalized and “smart” the more you use it by aggregating more of the type of news and stories that you actually read.  This “personalized magazine” space is getting crowded, other very similar apps include Editions by AOL, SkyGrid and News360.

Zinio.  Basically full PDF-like versions of your favorite print magazine subscriptions.  You actually subscribe to your favorite magazines through Zinio (usually at reduced rates) and the full print edition is accessible from your iPad.

Rdio.  Streaming music, on demand and unlimited.  I’m still waiting for the Console.fm and Turntable.fm apps, although both are available through Safari’s web interface.

Join.me.  A GoToMeeting or WebEx competitor and absolutely free.  In fact, you don’t even have to register and there are no software downloads.

360Panorama.  (iPad2) This mobile photo application allows you to take 360 degree photos with your phone by simply turning in a circle, the application automatically snaps the photos and stitches them together.  Here’s Venice Beach.

What’d I miss?

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Investing Through the Startup Noise

August 17, 2011 2 Comments

As someone who is both seeking my next professional role in an early stage business and (newly) looking for Angel investment opportunities in startups, it is incredibly difficult to determine the high quality businesses given the sheer volume of startups in the marketplace right now.  While there is unprecedented access and information on startups through sites like AngelList, the consequence of this transparency is a ton of noise – anyone can put their business idea out there regardless of its business viability AND its cheaper than ever to start a technology company as infrastructure, hosting and storage costs have never been cheaper.  Gone are the days of VC proprietary access to deal flow, but also gone are the vetting and screening of startups prior to them becoming discoverable.

I wrote previously on some tips for first time angel investors as communicated by Brad Feld and David Cohen.  But the biggest challenge – how to gain access to high quality startups – was left largely unaddressed.

Take AngelList, a site that launched only 1.5 years ago and claims to have facilitated over 8,000 introductions between founders and investors with 400 companies funded through those introductions.  Nearly 10,000 startups and 2,300 investors are listed and have profiles on the site.  Fantastic for access and transparency, but wow, that’s a lot of noise.

So as a job seeker and potential investor, how do I maximize my probability of gaining access to only the highest quality ideas without having to do an inconceivable amount of research?  Well, its different for job seeking v. investing.  I detailed my process for job seeking in a previous post.  Here, I’ll talk about how, as a new entrant to Angel investing, I’m going about gaining access to quality startups and cutting through the noise.

Letting other active Angels know I’m investing.  There’s a handful of folks in my network that are actively investing in startups and quite frankly, have better access and are better connected into the ecosystem than I am.  Sharing with them my intent to invest, including how much per investment and the kinds of companies I’m most interested in is a way to shortcut access to quality deals.  These people include former colleagues, VC’s who invest personally, seed-stage fund investors and others I’ve met along the way.

Building and managing my online brand.  This involves utilizing and being active on social media networks such as Twitter, Facebook, LinkedIn, Google+ and particularly AngelList and ensuring my profiles are up to date, comprehensive and consistent across platforms.  “Investor” shows up in bios and short descriptions.  Diligence is not a one-way street, the smartest founders and entrepreneurs research their potential investors so I want to be easily discoverable but in a way that I direct and control.

Leveraging the incubator programs.  These programs in some sense do a lot of due diligence for you first by accepting an idea/founder into their program and second by coaching and mentoring their early progress.  Nearly all of the reputable programs, but particularly 500Startups and TechStars, enable broad access to Demo Day presentations through live streams or blogging and then you can access and enter the investment discussion either directly with the founders or through AngelList.

Yesterday I attended Demo Day for the graduating class of 500Startups, an incubator/investment engine that boasts 175 portfolio companies and founded by prolific investor Dave McClure.  It’s a program similar to TechStars and YCombinator with the added dimension that they will make pure seed investments without the requirement of going through their incubator program.

I was actually really impressed by many of the newly formed ventures coming out of the program (and now seeking investment in the $300-500K range).  There were 31 presenting companies and over 1,000 participating audience members (via personal attendance and live stream video).  1,000 potential investors for 31 companies?  That tells you the dynamics of this market and why valuations are bloated right now, with many of these graduating “ideas” garnering pre-money valuations of up to $5M.  But there were 2 companies that were extremely interesting to me, so I reached out to them on AngelList and within a few hours, had access to their investment materials.  This would have been impossible for me just two years ago.

Did I mention AngelList?  Because I’m not “in the club” of elite investors that have automatic access to all the hot startups without the need to do any outreach, I need a way to 1) broadly market or announce my interest in investing and 2) access startups that I’m interested in.  AngelList is the best and only place for a new investor to do both of these things effectively given the critical mass they have achieved.

Make an investment.  While I’ve reviewed a half dozen companies, including meeting with founders, I have yet to find the right opportunity and I’m not going to part with my hard earned cash just because there is a startup gold rush happening right now.  That said, there are a few opportunities with founders I already know well that I anticipate will close in the next few months.  The point here is that building a track record as an investor is, or certainly should be, important for founders to accept your money.  This is particularly true in the current market where entrepreneurs have a choice of investors.  Why not choose money that comes from people who have demonstrated picking winners and who can add value through advising or introductions to their superior networks?

This process has worked pretty well for me, I’m curious to hear how other new investors are getting into the market and accessing high quality startups?

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The Love For My Son

August 7, 2011 Leave a comment

I’ve always heard the comment “you’ll never understand the love you can have for someone else until you have a child” and while I appreciated the point of view, I never really understood.  Now I do.

During Renee’s pregnancy, I never really had a deep bonding with this baby that I’d never seen and only periodically thought about throughout the day.  For Renee it was entirely different since she had this being growing inside her.  He was always present for her and there was a special bond developing and growing over those nine months.

It began for me in one precise moment, a moment I will never forget.  When his head first appeared in our world, that 1 second moment, I knew he was mine and that I already loved him in a protective and sacrificing way more than anything else in the world.  It really is hard to explain – unless you’ve experienced it then you know what I mean.

What’s so strange about this for me?  I don’t even know him.  I mean, even now after three weeks, he can’t talk to me, engage me or reciprocate my love in any way.  He can’t yet even look me in the eye.  All he does is sleep, eat and poop and while he is the master of all three, it’s all he can do and my interactions with him are exclusively caring for those three needs.  So why this deep, overwhelming emotional connection?  There is one attribute of a child that is unique about any other relationship or connection we can have – with pets, friends, partners, parents – that our children came from us, we made them, they are uniquely part of us and for me there seems to be an innate “protective and sacrificing” love that does not and cannot apply to anyone or anything else in exactly the same way.

There’s another new and exciting realization from this experience – a deeper appreciation, understanding and bond with my own parents, particularly my mother, for the sacrifice, commitment, guidance and love that she had and continues to have for me.  I never really even thought about what it meant to be a parent, much less having an appreciation for the 42-year sacrifice, protection and guidance that has dominated my mother’s life.

My favorite time with Jack now is when he is awake and alert while I’m holding him, usually after feeding.  In the span of one minute, his facial expressions gyrate across an entire spectrum that seems to communicate happiness, sadness, laughter, fear, constipation, joy, anger, wonderment, confusion, rage, contentment, exhaustion and anticipation.  I watch him intently seeing not only the physical features that are uniquely Renee or uniquely me, but also the emotional expressions that resemble us as well.  I think about him growing up and visualize various stages of his life when we can play together, when I embarrass him in front of his girlfriend, seeing him graduate, imagining what his personal and professional passions will be and worrying about whether he will be happy in life.

But for now I’m content to cherish each day, as every day that passes is one that he is growing up and that is forever in the past.

One thing is for sure, I love my son.

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What’s Next? Part 2: Finding the Right Opportunity

August 2, 2011 Leave a comment

In Part 1 of What’s Next?, I discussed my ideal search criteria for finding my next professional role.  In this post, I’ll talk about my process of uncovering, narrowing and choosing the right opportunity based on that criteria.

So, here’s the process I’ve been following –

Determining my ideal search criteria.  Geography, role, stage of company development, industry and cultural attributes were all important to consider during this self-assessment stage.  Part 1 of this series was devoted solely to describing in detail this first step.

Putting myself “out there”.  This step involved several activities for me, most important (and most surprising) of which has been this blog.  While I didn’t anticipate or intend it, there’s been a positive reaction to my personal and professional transparency, perhaps I’m coming across as more genuine and “knowable” than a typical candidate, I don’t know.  My original intentions for the blog were simply to enable  my close friends and family to keep tabs on me and the important things in my life, to motivate myself to form and articulate points of view on certain subjects and finally, to keep a journal of sorts.  While readership is not substantial, my blog is discoverable during the recruiting process and it has helped, not hurt my search efforts based on feedback I’ve received.

Another important component of this step was to take ownership of my personal brand – ensuring consistent, comprehensive and current information and messaging everywhere online.  Updating and staying active on LinkedIn, Twitter, Facebook, Google+ and this blog ensures that I’m easy to discover and the message I want to share is consistent across all platforms.

Firing up the network.  To be clear, this is not (yet) to target specific companies although several companies have emerged opportunistically directly from my network right from the get-go.  This step is really about a discovery process of re-connecting with folks in my existing network to 1) get introductions to others in their networks that either I want to meet or they recommend, and 2) to get perspective and insight into what is happening in the marketplace for the types of roles/companies I’m interested in.  I reached out to friends, current and former colleagues, VC’s I’d met while raising capital for TrueCar and Pricelock and tried to prioritize the initial outreach according to my search criteria in step 1.  So balancing access to both geography and to types of target companies I am seeking helped to focus the first round of contacts.

This has been the most fun part of the process for me, re-connecting with people that I’d lost touch with and also forging new and interesting relationships.  The more conversations I have, the more I notice trends in advice, perspectives and prospective company names.  Having “insider information” or knowledge of specific companies that others believe would be a strong fit really provides an efficient, targeted leg up on identifying interesting and high probable fit companies.  This outreach process started nearly 3 months ago for me and I did no real specific company targeting for the first two months.  I had conversations and/or met with roughly 100 individuals during this phase, half of which I reached out to directly and the other half came through introductions from the first half.

Creating a target list of companies, researching and narrowing.  After several rounds of networking conversations and research, I had well over 50 companies across 4 geographies that were mentioned somewhere along the way or came up in my own research.   Without getting too scientific, I matched up the opportunities first against my criteria and second where I thought I could get a personal introduction.  This trimmed the list by half to roughly 25 companies, a healthy portfolio recognizing that a portion of the remaining wouldn’t be a fit from a role perspective, meaning no senior ops leadership role is currently available.

Another important output of this step was to identify the “key influencers and connectors” from all of the prior networking activity that have credible access and can make quality introductions to the “short list” of interesting companies.  There are less than 10 of these connectors on my list, but most have provided multiple introductions or referrals.

Circling back for introductions.  Folks in my network really appreciated that I was specific when I reached back out to them for introductions.  Instead of contacting them for another general conversation or update, I asked for referrals to specific companies.  In many cases, I crafted the introductory email that they could forward to their contact with personal comment.  While I deeply appreciate the time people have invested in collaborating with me, I owe a huge debt of gratitude to this smaller group of people who have put their own personal credibility on the line by introducing and recommending me to others in their networks.

Eat your Wheaties and dig deep, time to interview!  While every conversation is ultimately an “interview”, this stage is the most grueling and requires a lot of energy – actually going through the interview process with specific companies.  I’m finding that EACH company that I enter the process with as a candidate involves 3-6 rounds of interviews and requires interviewing deeply with 5-10 individuals at the company, Board and investor group.  Total interview time alone, excluding travel time, can top 25-30 hours per company.  This is the stage where I’m spending the preponderance of my time now across a “handful” of companies, although not every opportunity is in the same stage of development.

It is important to note that my approach has been a very personal one – reaching out to my network, extending that network and getting personal introductions and referrals to companies.  I did not post my resume anywhere online or respond to any job postings through traditional channels.  My experience shows that where supply outstrips demand (limited roles available, many gunning for them) and the more senior the role, the more critical a referral and personal introduction becomes to even be considered for a role.

I hope and expect to complete the process and make a decision within the next 30-60 days and dive into the next exciting role on or around October 1.  If I’m lucky enough to find and land the right opportunity, I’ll post Part 3 and let you know who it is.  Stay tuned!

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