Investment Requests

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At our last bi-weekly partner meeting, Jerome, co-founder/CEO of SnapEngage, mentioned that several investors had emailed him to see if he’d be interested in talking. When I asked how he responded, his reply was beautiful…

“Thanks you for your message. SnapEngage is completely customer funded and we are not looking for additional investment. In order to focus on our main investors (our customers), I’ve decided to not take calls from investment companies.”
I’ve watched myself and too many entrepreneurs waste a lot of time and energy talking to potential investors and/or acquirers. It’s usually curiosity and ego driven to be able to put a price on what we own. It also tends to be a huge distraction to serving our most important investors – our customers. I wish I had this good of a response (and realization) twenty years ago! Thanks Jerome.

Brain Trusts

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Every other Thursday my operating partners/founders and I meet to share challenges and best practices across our different businesses.  It’s a cool little peer brain trust that helps us over businesses’ little challenges. We celebrate and remind ourselves we’ve accomplished good things. We offload emotional burdens and remind each other we are human. We help each other with best practices. We share experiences of how we overcame similar challenges. It’s a pressure release valve, gas tank filler, and route map all-in-one many weeks. 

I’ve been involved with a handful of different brain trusts throughout my life with business peers, mens groups, and leadership teams within my businesses. The format is simple, give updates of the good and the bad, be candid with each other, and then share experiences that may be of help to each other (vs. giving advice). Then let the magic happen.
I first read about the idea in Think & Grow Rich by Napoleon Hill which I read just out of college. As a result I assembled an advisory team of folks much more experienced/successful than me. It was great, but missing the peer component. I then found YEO (now EO) and got my peer group of other young entrepreneurs who were running their heads through walls just like me.  
I’ve recently joined a peer group of entrepreneurial parents raising young kids. We meet by phone at 5am MT once a month to share our updates and best practices. Inspiration for raising great kids pops out of this meeting like popcorn.  
I’m in the middle of reading the founder/leader of Pixar, Ed Catmull’s book Creativity Inc. Which prompted this post. He says their internal peer brain trust has helped them turn crap movies into great movies. A small group of their movie directors and creative talent meet every couple months to preview films in progress. They provide candid feedback to each other as peers that help the director see blind spots in their plots, and scenes. They don’t prescribe how to fix anything. They just share their observations so the director can find their own way to improve the films. 
I remember creating my first braintrust seemed like a hard task. But it was actually easy once I identified the folks I would want around a table with me. Inviting them seemed awkward. But with how quickly they said yes, it was easy. Creating a format seemed hard, but the conversation and wisdom flowed really easily with basic conversation starters. If we share a similar vision, the rest tends to flow.   
In the case of my current business partners meeting, we all share a passion for building great long-lasting organizations. We also share a philosophy of being customer-funded, and as a result, organically grown.  With the intent to help other like-minded entrepreneurs, we’ve decided to share some of the topics that come up at our meetings. Which I will blog about next. 
So, want more brain, more heart, more soul to help you prosper? Start or join a brain trust. 

Free Your Teams from Bureaucracy

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I describe “bureaucracy” as any system that doesn’t add value and as a result wastes and sometimes enslaves people’s time. The word itself is overly complicated to spell and therefore use. It’s actually a perfect name for itself. Unfortunately there’s a lot of it in the World. One of my personal missions in life is to help eliminate as much of it as possible. Why? Because we are here for a short time, and who wants to waste it on stuff that doesn’t make a difference?

In business, here’s what it looks like. Two of my companies’ support teams were documenting every customer support request. Sometimes in several systems. Using up 70% of their time. Leaving only 30% of their time to actually help customers. As we weren’t able to respond to customers fast enough, we kept hiring more people, which required even more systems to keep track of everything and all the people we were hiring. We lost track of the end goal… happy well-served customers.

At RegOnline, we discovered we could eliminate the need for support if we just simplified the systems our customers interacted with… clearer wording, hide advanced options, better self-service online help. We then simplified the tracking systems our support team dealt with to free up their time. The result… less confusion, less busy work, more free time and value for everyone. The best part was how much easier we made it for customers.

This month at SurveyGizmo, SnapEngage, and PosterBrain we added something new to discuss at our weekly all-company meetings… “What are the most common questions our prospects and customers have asked us in the past week?” We started doing this because we realized that our weekly meetings were focusing on US (revenue, customer count, expenses, profit) and not enough on our CUSTOMERS.

At PosterBrain today, the most common questions customers asked in the past week were…. How will my picture look?, Where are you located/shipping from?, Do you dry mount?, etc.. I suggested rather than making people contact us to get those answers, how about we put a FAQ on our homepage? Our customer service superstar laughed and said “Then what will I do with all my time?!” 🙂 I said how about those outreach emails you’ve been wanting to make for weeks to attract new customers!

Let Your Customers Fund Your Software Startup

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“Anything that won’t sell, I don’t want to invent.
Its sale is proof of utility, and utility is success.”

– Thomas Edison

I’ve seen hundreds of entrepreneurs spend more of their valuable time raising money than they do focusing on the true reality of what customers REALLY want to pay for. No matter how much funding goes into an organization, it’s not a truly sustainable business until the revenues from it’s customers cover all the expenses of the business. The only way I know of generating sustainable revenue FROM customers is to generate real value FOR them. Customer proof is the ultimate product proof.

Which is why I decided to get behind a new crowd-funding/pre-tailing site for software startups called Ramen. Where the “crowd” FUNDING the software are the potential users OF the software… they help fund (no equity involved) the software they would want and use. I love the idea of getting real customers to fund our businesses.

Thank you Niel & Ryan for making Ramen an option for startups! Which by the way, they are crowd-funding their own startup with their own potential customers (it’s kind of like Being John Malkovich). I’m doing a matching sponsorship, so if you have a software idea that you’d like to test your CUSTOMER traction on as you build/design it and would like their help, well then help back Ramen too!… ANNOUNCING PROJECT MATCHING SPONSORS IN RAMEN TO THE TUNE OF $5000

1/22/14 PS – In full disclosure, Niel and Ryan choose to do an angel round prior to launching. Stay tuned for their follow-on “customer-funding” round.

Successful Turnarounds

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I’ve been fascinated by business turnarounds since college… take an ailing company that’s losing money and turn it into a profitable, sustainable company. I’ve been fortunate to help a few companies turn around and also love hearing other’s stories. They all share these themes:

  • Revenue is flat or declining
  • Expenses exceed revenues
  • Additional capital is either non-existent or extremely expensive
  • Management and employees are scared or checking out

The key steps to turnarounds are: 1. Cut everything that isn’t producing revenue/real value for the customer – until expenses are below revenues, including: expensive executive management, excessive product development, unprofitable biz dev or sales teams, product lines, office space, discounting, unprofitable marketing and advertising, commissions, ceremonial account managers, employee perks, charitable contributions, etc. 2. Focus intensely on the real value/products that customers want to buy by eliminating distracting non-core products and services 3. Renegotiate debt/payables to pay-out over time. Show an ongoing commitment to lenders and vendors by paying something every month. But, don’t pay more than what the company can reasonably afford. 4. Go Open Book with employees and management. Show everyone exactly where the company was, is, and will be. Let them be a part of the turnaround. Meet weekly to review progress. 5. Bootstrap exciting new products that customers really want (Ford Mustang revival, Apple Ipod) 6. Enjoy the profitable fruits of having a leaner organization that delivers more value to customers. Turnarounds are really hard for most to envision/lead because it takes a fairly rare leader who can see through to where the waste is in the organization (i.e. not delivering value to the customer), has the courage to actually trim to the core, the ability to instill confidence and ownership in those remaining, and the awareness to listen and drive the leaner organization to what their market/customers really want next. I find it thrilling to uncover value and add life to old things, unlike most of my entrepreneur friends who get more excited about starting things from scratch. Two turnaround books/stories that I LOVE are: The Second Coming of Steve Jobs (turnaround of Apple) and American Icon (turnaround of Ford)

Minimum Viable Partnerships

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Over the years I have seen over a hundred sales/reseller/biz dev partnerships come and go. Some were seemingly huge, with big brands behind them. Most were small-to-medium. But ALL felt like very promising ways to grow the business. I’ve spent and watched gobs of money and energy on customizing our products, taking valuable time away from core products, and even hiring extra folks to staff the waves of new customers that would soon come.

Some examples:
Adding a product link on every page of a partner’s site with millions of visitors a month. 
Partnering with an event directory site that listed hundreds of thousands of events that could send event organizers to our event registration software.
Partnering with the largest seller of college newspaper advertising to resell our college advertising product
Partnering with the largest financial services company in the world to offer an easier way for their business customers to collect from their customers

Partnering with a huge consumer publishing site with millions of visitors to run a contest to use the product.  
“If you build it, they will come” kept ringing in my ears… stealing millions of dollars of resources away from my core product and towards this vision of a more fruitful EASIER future via these partnerships. 
Not ONE out of one hundred of these partnerships can I point to and say it produced a positive return on resources invested. But I still hold hope, year after year, partnership after partnership, as I wait for the one. We can’t give up hope, because partnerships are too much fun and there ARE plenty of examples out there where they have made the company a huge success. Like Microsoft & IBM, Apple & AT&T, in the early days. 
So what to do? A little partnership-worn and hopefully wiser, I NOW say let’s walk before we run. What’s the minimum viable partnership (MVP) we can test to see if teaming up actually produces any fruit for us? How quickly can we test the power of our relationship and how that translates with our customers. 
For example I recently heard about one startup looking to partner with another, even trade some equity, because they both imagined that the partnership of millions of emails of one partner would be a perfect fit for launching the other startup. I suggested that before spending days together charting out a master deal why don’t they email a small subset of the group to see what kind of impact they might be able to extrapolate. When they approached the partner about it, it turned out they only had 20,000 permissible emails, not millions. Certainly not worthy of spending days talking more about it or trading equity. 
Two of the most common push-backs I hear from potential partners on MVPartnerships are when partners want white-labeling, customizations, integrations, complicated rev-share agreements, and sometimes real capital before getting started. While it’s not optimal, most partnerships can be tested without having to have those. By putting an emphasis on doing a quick test to see if there’s any real demand/value, and THEN we’ll ALL know better how to design the partnership going forward.  It usually puts them at ease, reduces the upfront workload,  and more importantly causes everyone to be more realistic by testing our field-of-dreams assumptions first. Saves lots of money, resources, and broken hearts that way. 

Being of Value

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The only reason businesses exist is to be of value to its customers. The more value we can deliver, the more successful we will be.

How can we deliver MORE value to customers?  Since most companies spend less than 1% of time and resources on that question, we can start by asking that question more often, like once a day.

Here are some of the areas that I’ve seen the most value added:

  1. Over-the-top customer service
  2. Removing things that customers don’t care about – (i.e. old-school holiday cards, pet projects that customers haven’t used)
  3. Eliminating positions that don’t really pay for themselves that frees up resources to spend on things that really DO matter to customers (like great customer service)
  4. Adding those little features that customers keep asking for
  5. Eliminating confusion on our websites
  6. Eliminating confusion within our products and pricing
  7. Eliminating confusion in our pricing
  8. Picking up the phone and talking to real customers regularly
  9. Adding random acts of kindness to customer experiences
  10. Doing meaningful things to take better care of  employees (which translates into them wanting to deliver more care/value to customers)
  11. Fixing customer issues really fast for them

    Here’s a list of things that suck our attention away from adding more value to our customers:

  1. Raising money, updating investors, and pouring over financial projections and spreadsheets
  2. Talking to potential suitors about selling all or part of our companies
  3. Woo’ing pedigree mid-level management (who mostly, in the end, don’t add value) 
  4. Figuring out which pens, hats, and t-shirts to put our logo on next
  5. Moving offices every year and putting too many time-wasting devices into our offices (big spaces, foosball & ping pong tables, cafe’s, etc) 
  6. Sending generic holiday cards, preprinted thank you cards, and anything else that smacks of generic “Thanks for being our customer” crap
  7. Continuing to employ people who don’t go the extra mile for/exude enthusiasm for customers or co-workers
  8. Continuing to invent new roles for people who don’t do well at their old roles.

Ownership Thinking

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Over past couple months, I’ve had some MAJOR changes in my thinking about empowering and compensating employees. It’s based in Open Book Management but with a lot of important twists to it.

My first inspiration, came from reading Ownership Thinking by Brad Hams (published last Fall). He worked with Jack Stack of The Great Game of Business and now has a consulting group that helps companies shift their whole organization with great results. I also heard Brad speak in Boston and then had lunch with him and my partners.

My next inspiration came from Zingerman’s (again). While dropping Ari (co-founder) off at the Denver Airport I asked him where he thought my biggest opportunity for growth was, and he said open book management. A couple months later, me and my partners hopped on a plan back to Ann Arbor to spend two full days learning everything we could about how they do open book management and why it makes such a huge difference with employees, bottom-line results, and constantly delivering more value to customers (

In a nutshell (which will do no one any good, unless they really dive into each further):
1. Weekly meetings with dashboards (see above example)
2. 20% of meeting time spent talking about what happened, 80% on brainstorming improvement
3. Front-line employees “own” the lines on the dashboards – creating more involvement/engagement
4. Plan & Forecast the numbers as a group
5. If team exceeds plan, then a “gain share” on what’s made above the plan is shared
6. Everyone learns about revenue, expenses, profits, inventory, and receivables.

Brad Ham’s Ownership thinking takes it one step further with having Rapid Improvement Plans running every quarter, whereby the team picks something to improve. Calculates what the improvement is worth to the company and then financially shares part of those improvements with the employees. For example, if a $100k reduction of receivables or inventory is worth a $10k increase in profitability to the company, the employees will share 20% of that improvement or $2k. From a bonus compensation standpoint, what I like is that it is an EARNED bonus and NOT an entitlement that typical profit share or end-of-year bonuses tend to be. 

Having spent a couple months now across four different companies, the first benefit I’ve seen from this is it’s a lot more fun for employees to be more involved and have more visibility into the details of how the business operates. Many comment on how they feel they are getting a free MBA. The second benefit is seeing employees start thinking/feeling like owners and operating with more can-do-it-ness. It takes the pressure off of management and is actually more effective at getting results than being a management dictated organization. The third benefit I’ve seen is seeing an increase in the level of value/satisfaction being delivered to customers. And lastly, seeing real results in the organizations operating more profitably (lower expenses AND higher revenues).

It’s a deep lake that will take years to learn how to swim really well in. But for now, being waist deep and going deeper feels really good.

SnapEngage Joins The Felix Fun!

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I’m excited to announce that SnapEngage, enterprise-level live chat, has joined The Felix Fun family of companies. Jerome Breche & Jerome Mouton bootstrapped their company out of the TechStars program in Boulder (where I originally met them). With no additional outside funding, they have grown to thousands of paid clients/raving fans and a great team of people with a lot of growth ahead of them.
What I love about the Jeromes is that when funding was not readily available to them, they rolled up their sleeves and scrambled like hell to create a product that companies were willing/wanting to pay for. From there, they’ve asked AND listened to ALL their customers and have iterated like crazy as they got feedback on how to improve. They’ve hired only as revenues could support, have kept overhead low, and openly share their (cupcake) love with their customers.
They’ve done an ingenius job of building SnapEngage so it serves the unmet needs of middle-market companies. It has more integrations and better API’s than any enterprise-level system out there. It is more stable and reliable. And it’s more customizable and easier to use than other enterprise-level systems. They’ve priced right as well in delivering WAY more bang for the buck too. All-in-all a winning combo in the SaaS world!
I look forward to being a part of their team and helping to grow a great “built-for-life” company with them!