I work at the Strategic Consulting Services arm of OpenView Venture Partners. This blog is particularly useful for the product and development team of any technology firm and can help with its product management process.

I recently read a blog about simplifying the design of tech products and how to increase technology complexity without frustrating or pushing it away from the users. Users highly value simplicity, sometimes even more so than they think they do. The blog was based on a book called The Laws of Simplicity by John Maeda, president of RISD and former professor at the MIT Media Lab. The following are the key takeaways:

You should advance your product, but don't necessarily have to upgrade it. You can have a string of small changes over time and do it in a way that doesn’t entirely alter the scene. This can be seen by consumers as no change at all. On the other hand, a single big jump is harder to hide. This just means that if you want to add a large number of features and functionalities to a product, it’s best to do it gradually over a period of time rather than dumping them on users all at once. This way, users feel more comfortable with the changes; they appreciate them more as the changes don’t seem annoying and life-changing to them.

Keep the core interface consistent. Apple and RIM are great examples of this. They have kept their user interface consistent over generations of releases. Amazon and Google are other examples too. They have made changes to their pages, but have kept the shopping cart icon, the search box, etc. in the same places, making them seem as if they never changed. The worst case of interface inconsistency was Office 2007 for Windows. Users felt like they had to learn it all over again.

You don’t always have to talk about it. If the core interface is consistent and the advancements in features are subtle, why not let consumers work out the changes themselves? iPhone has done this very nicely. When its software was updated to version 3, nothing different could be noticed until someone would accidentally place his/her finger over a text, and a little “copy” balloon would appear over it. This told the user that the iPhone now had the cut-and-paste functionality. This news wasn’t delivered in an email, tutorial or in the mail, but was brought to the user very delicately, during the user’s regular course of usage. Hence, with any new feature you add to your product, you don’t always have to state every change to your consumer; in a lot of  cases, you will be fine leaving it to the consumer to figure out over time.

Allow users to select what they want to keep. For instance, Gmail users don’t have to use labels and their folder-like attributes and can simply ignore them if they want to. They can also stick to the old way of downloading attachments, as opposed to opening them in HTML or in Google Docs. People have the option to use these features if they want to and are not forced to do them. Since people don’t like change, technologists should not push their innovations on users, and should let people decide for themselves, so that they can start using the new features only when they feel like they are ready for them.

The above examples are not the only instances of companies that have done a great job in simplifying complex new advancements. There are many more companies that have done well. The four points mentioned above are just meant to give you an overview of what might work better for tech consumers when you are designing a new technology product or marketing one to them.

HP is suing former start CEO Mark Hurd to stop him from taking a leading role at Oracle.

It is difficult enough for any company to attract high caliber, proven senior leadership under normal circumstances, whether it be a large public company focusing on business growths strategies or an expansion stage software company looking for better competitive positioning or company exit strategy.
But firing a CEO who has just led your firm through a period that's been successful by most measures under dubious circumstances and then suing him from taking another job is not a great way to attract top talent.

A lot of a company's success depends on its ability to attract and retain the best people, especially in the CEO chair, so this latest development does not bode well for HP's near term future.

Thinking like Publishers - Using Editorial Calendars

OpenView Venture Partners, a Boston venture capital firm, will be releasing a new website in the coming weeks to share our expertise and approaches for building expansion stage companies.  The new site will be a pure content site, focused on providing best practices, frameworks, and ideas for senior management teams.  We will be providing different types of content about the important topics for expansion stage companies -- customer development, whole product development, and company development.

Most recently, I have been dedicating a lot of my time focusing on the creation of the Labs website.  (By the way, we are getting really close to releasing the site)!  I have learned a lot along the way.  Stay tuned and I will continue to post some of my obstacles along the way.  For now, I'd like to discuss using content calendars.

As I mentioned, the Labs website is a channel for us to share our ideas and insights with the expansion stage technology community.  We are developing the following content types to distribute on the site:

• Articles 
• Practice Kits
  
• Podcasts
  
• Videos
  
• Q&As with Technology Executives
  
• Articles and videos from the community

We have utilized two calendars to help plan our content marketing strategy: a content creation calendar and an editorial calendar.  Our content creation calendar helps us keep track of who does what when.  Since we have over ten people contributing various content to the site, we have found that one calendar dedicated to the organization and management of the development process. 

Overview of the Creation Calendar
We have set up our creation calendar to track the following: 

1. Owner
2. Supporting
3. Supervisor
4. Category/Theme
5. Content Type
6. Month of creation

Here is a sample screenshot:

Overview of the Editorial Calendar

OpenView has focused on its editorial calendar for quite a few months now.  In the beginning stages, we got by on planning by the seat of our pants.  Now that we are becoming more and more comfortable with content marketing, we are really thinking like publishers. 

Our editorial calendar has been simplified due to the fact that we have a separate calendar planning the creation of our content.  It simply focuses on the distribution. 

Here is a sample screenshot:


If you are looking to create your own editorial calendar, check out this Content Marketing Institute post from Michele Linn for a great how to guide on building a calendar.

Online backup for the cloud, Backupify, has raised $4.5m from some local area Venture Capital Firms.

I've been an interested observer of this company for some time now and, as more and more consumers and business users move their data into the cloud, this space becomes more and more interesting. Cloud accounts (Facebook, Twitter, Google Apps, etc.) can be safeguarded by Backupify's use of Amazon's S3 Cloud.

I see a bright future in the backup and archiving of social media and cloud apps. I'm sure there are investors everywhere looking to follow suit from the most recent Backupify venture capital investors.


http://deals.venturebeat.com/2010/09/07/backupify-fundin/

As a partner in a Boston based Venture Capital firm that invests growth capital in expansion stage companies, I was reading last week's WSJ when I came across an article that I wanted to share with founders, CEOs and the management teams of early and expansion stage software companies that is relevant to the challenges they face and the decisions they make every day.

As an operational software executive for over 25 years, I made plenty of good decisions and I also made mistakes, which is how I learned to make better decisions through the pain they caused. But one philosophy I always had was to try and learn from other people's mistakes, so I did not have to make them myself.

The article is titled "10 Mistakes That Start-Up Entrepreneurs Make", and you can read about it here.

My advice to you is to read it and file it away where you can find it again. Then pull it out to review every now and then to refresh yourself... it is always easier to learn from other people's mistakes then your own.

All the best!

G

There are two trains of thought when it comes to the first action item in a outbound prospecting scenario:

A. A lead generator sends an introductory email to a prospect prior to making the first call in order to "warm up" the lead.

B. A lead generator first calls into a prospect hoping to catch them live and engage in meaningful conversation. An email is sent after the first touch-point (whether that is voicemail or conversation).

Different sales managers have different opinions about sending the email first, vs. calling the prospect first and in recent weeks, this topic has come up more than once around the OpenView office.
Here are some reasons to send the email prior to the call:

• The call is warmer, and you can say, "I just wanted to follow up from my email." It gives more legitimacy to your call.
• You may get some immediate interest from the email recipients, which will help you prioritize your calling order.
• When having the conversation, you can ask your prospect to refer to your email for a visual representation of your product (if you had included an attachment).

Here are some reasons NOT to send the email first:

• Your email could be considered spam, and you may get blocked/reported.
• You are giving your prospect an easy out to just say, "No thanks- not interested. Take me off of your list."
• Unless you have a marketing team fully committed to your outbound efforts, your email message/supporting content may lack true clarity and could be misinterpreted by the prospect. 

As expansion stage venture capital investors, we are committed to coaching our portfolio companies on sales best practices, particularly outbound prospecting. On the labs team, we have resources committed to lead generation services for our investments that are looking to build their pipelines with new opportunities generated through cold calling efforts.

OpenView appreciates the value of high-quality content to sell most effectively, and at the end of the day, an email is an important form of content in the sales cycle.  If you have tested content that resonates with your target market, and you are certain that you have correct email addresses on your lead list - I say go for it. Send the email prior to the first cold call. The warmer the lead, the better.

However, if your content is still a work in progress, and your lead lists' email addresses are dicey, just pick up the phone and TALK to the prospect rather than potentially turning them off through a sub-par email blast. Remember, first impressions are everything. Confirm their email address during the call and find out what content makes the most sense to share with him/her based on their specific needs/pain points.

What are your thoughts on the email then call/vs. call then email in a lead generation role? I know that there are some strong opinions out there about this topic, so please leave a comment with your preference on the subject matter.

LinkedInAs part of our content marketing strategy, I am working on a practice kit which demonstrates the value of LinkedIn for expansion stage B2B companies.  The kit also provides a high level overview of the channel and initial steps to take to ensure success. Below you will find a preview of the "Business Benefits" section of my practice kit which will be posted on the OpenView Venture Partners website in a few weeks time.

BUSINESS BENEFITS: WHY USE LINKEDIN?

Your B2B business can benefit in multiple ways by establishing a presence on LinkedIn.

Stay Top of Mind

Primarily, by creating a LinkedIn profile and starting a network of contacts, you are ensuring that you remain top of mind for future business needs and networking opportunities.  By maintaining an up-to-date profile showcasing all relevant information, you keep your network of connections up to speed on all new career/business developments.  It is a quick and easy way to ensure that you are within easy reach to your business network.

Manage your Reputation

By establishing a presence on LinkedIn you can manage the professional information that is publicly available about you.  By creating a profile you are distributing the best and most accurate information, which will likely be picked up by search engines and serve as a primary reference for those looking to learn more about you and your professional history.

Find and Recruit Talent

LinkedIn can also help your business to find and recruit talent.  The ability to build connections, join relevant groups and utilize the Job Posting functions are all great options when seeking talent.   Unlike other recruiting sites, LinkedIn can connect you with passive job seekers, or those that are not actively looking for a new opportunity, but could consider a move for the right position.

• Once you have a completed job description, you can post it to your profile to see if anyone in your network is interested in the opportunity or may know of someone who is.  This is a great way to get recommendations from your peers.
• If you know the background you are looking for, you can search for individuals with that job title or experience.  Upon reviewing their profiles to see if they could be a possible fit you can send them a private message detailing the opportunity to gauge interest level. 
• By joining and becoming an active member of relevant groups, you are likely to find individuals who may be a good fit for your job opening.
• LinkedIn has a Job Posting function that costs under $200 for a 30 day post.  This tool will post your job description to relevant users' homepages, along with details on how to best contact you.

Generate Feedback

LinkedIn can also be used to generate feedback on ideas or products.  By starting conversations in groups or by posting in your status update, you give others the opportunity to respond/interact with you on that subject.  This is a great opportunity to get the feedback of opinion leaders and to connect with key influencers in your space.

Thought Leadership

By posting your thoughts and commentary to groups, you are also building your thought leadership. Thought leadership is defined as an individual who possesses a deep understanding of a business category and the marketplace in which you operate.  One can establish thought leadership by contributing to discussions on group boards or by answering questions on the LinkedIn Answers board.   This thought leadership can establish you as an expert and position your organization as a leader in the industry.

Find Vendors

LinkedIn can be used to find vendors to provide services for your expansion stage company.  By posting your needs to groups, you can gain the recommendations of others and references for vendors who have proven to be exceptional in the past.  This is a valuable tool that can save your business time and money, as well as the headache of engaging with a disappointing vendor.

Lead Generation

Though LinkedIn’s purpose is to keep you connected with existing contacts, it can also be used for Lead Generation.  Through thought leadership you will establish yourself as an expert.  When answering questions or responding to threads, one can gain traffic to your website by directing users to applicable blog and website posts.  When you are hosting a webinar or forum, be sure to invite your connections to participate -- this is a great way to engage potential leads.  LinkedIn also has a DirectAds service which is still in beta testing.  This service allows users to promote relevant content to targeted demographics to assist in Lead Gen.

 
Question of the Week: How do you use LinkedIn?

Expansion stage CEOs are generally a pretty lonely bunch.  I wrote about the lonely CEO in a recent post and then wrote about what the lonely CEO can do and what the senior management team can do to improve the situation. 

The company's board of directors can help the lonely CEO as well, which is the topic of this post. 

Boards and board members can have a large impact on the level of support the CEO experiences, which translates into better CEO and company performance.  Most of this comes from working hard to get on the same page with respect to priorities, assisting the CEO with the priorities in a way that works best for the CEO, and avoiding distracting the CEO with issues and/or opportunities that are not a current priority. 

Boards can help the lonely CEO in four ways.

If you are a board member of an expansion stage company and you want to have a large impact on the company while helping to support the lonely CEO, do the following:

1. Get a board member other than the CEO to be responsible for getting the board to a unified point of view on priorities.
2. Set priorities with the CEO that are are both clear and attainable.
3. Be clear between meetings on what ideas and contacts are helpful for the current priorities and what should be put on an idea backlog for future reference.
4. Ensure that the work you do with senior managers is coordinated through the CEO.

Pretty basic stuff in theory, but relatively difficult to do in practice.  The remainder of this post goes into more detail on each of these points.

There are several traps to overcome to really achieving this in practice:

Trap 1: Many board members like to work individually with the CEO rather than to than to work in a more team oriented manner with the CEO.  If there are several good board members working individually with the CEO, it can get quite distracting to the CEO.  This issue gets amplified when the CEO is also in the chairman role, responsible for pulling the board together as a team, as the CEO is the center of the board.  The issue gets amplified further when the CEO does not have experience working on expansion stage boards and/or when the CEO does not have the time or inclination to make the board as effective as it can be, which can result in dysfunctional boards.

Solution: One great approach for addressing this issue is to either appoint an outside chairman to take on the board leadership responsibility or to appoint an outside lead director whose responsibility is to work with the CEO/Chairman and the other board members to help make sure that the board practices are solid, that the board works well together, and that the board gets crisp on the priorities for the company.

In my recent experience with boards, we recruited an outside chairman to one company and appointed a lead director to another company board.  Both situations have resulted in more cohesive boards, which have been a huge benefit to the company, the board, and the CEO.

Trap 2: Most boards and management teams do not set clear, objective goals and/or limits for the number of goals that a company is going to take on at any point in time.  The less explicit the goals, the more difficult it is to align the team to accomplish them.  The more goals a company has, the less it can really nail any particular goal, so not setting limits leads to a lot of distraction away from the several key goals that will really move the company forward. 

The person that feels the overwhelming distractions the most is the CEO, who is left to feel a lack of accomplishment because the goals are not getting accomplished.  This feeling is further amplified by individual board members who are not happy that their top goals not getting accomplished and communicate this to the CEO.  This cycle of too many goals, lack of clarity around the goals, lack of accomplishment and negative feedback can lead to a really lonely CEO!

Solution: The fix for this is to for the CEO and board to work hard to try to agree and commit to a few really important goals for the CEO and company during the board meetings, determine how best to assist the CEO with the goals after the board meetings (including, possibly, leaving him/her alone to execute on the goals!), and then to put all of its time and attention into helping accomplish the goals.

The majority of the boards I am involved in have gotten better at doing this over time.  We push the idea of goal clarity,  getting locked and loaded for the year, and getting locked and loaded each quarter.  Companies that have adopted these practices get success and are inspired to get even better with the practices over time with greater success.

Trap 3: A good board member leaves the board meeting, has a conversation with someone the following week, which gives the board member an idea for the company, and can't help but send the CEO an e-mail with the idea or connect the CEO with a contact related to the idea. 

Good board members offer a lot of ideas and contacts to CEOs.  This can be really useful, but also can be quite distracting for the CEO, particularly when the CEO has several good and active board members acting individually. 

The ideas and contacts can sometimes be scattered and the relationship between the board and the CEO can turn into one where the CEO feels that he/she needs to work on something since it was a request from a board member rather than because it is the right thing to do for the company.  This path can lead to an even more lonely CEO, even though the good board members were trying to do the right thing!

Solution: The fix for this is for both the board members and the CEO to try to figure out if the idea or contact is in line with the current priorities, and if the CEO activity is a good use of time right now.  If it is, then execute against it.  If it isn't, agree to put it on an "idea backlog" for future reference.  A more advanced approach would be to publish the idea backlog (or multiple idea backlogs based on issue) to the entire board and senior management team in a collaborative workspace such as Central Desktop.  Using an idea backlog will allow an idea to be captured without creating work that distracts from the current priorities.

My experience with this idea has been mixed.  I still get excited about ideas and new contacts for the CEO between board meetings and/or meet a person that I think would benefit a particular CEO and can't help but make an introduction.  Over time, I have gotten better, but I am still sometimes a distraction to the CEOs that I work with.  It helps quite a bit when the CEO says, "I will put this on the list as it is not a current priority, but it is an idea that we should look into at the right point."  This approach is great for me as it makes me feel that the idea will not get lost, reminds me that I can be distracting, and gives me comfort that the CEO is taking the right steps not to be distracted.

Trap 4 and solution: Good board members have the respect of the senior management team, so board members working with senior managers on particular initiatives can either really help or really impede the CEO's management ability.  Board members need to make sure that they are communicating working with senior managers in a way that is compatible with the culture of the company and the CEO's style. It is also really important for board members who interact with senior managers to coordinate their activities through the CEO so that the CEO can ensure that he/she can continue to manage the people and the company effectively. 

Early in my evolution as a board member, I was pretty excited about adding value to companies by working with senior managers directly.  It took me a while to figure out that, while the work was valuable, it was causing a burden on the CEOs I was working with because it led to some confusion of who was in charge.  I fixed this issue pretty quickly once I understood it by simply finding out from the CEO what the best approach was given the circumstance and then following that approach.  It is an extremely easy approach to follow and it works quite well.

I am sure that there are other traps and solutions for boards working with CEOs that are not on my short list.  If you are a CEO or board member and have views on this list or other ideas to add to the list, please let me know by making a comment!

For senior management teams of expansion stage software companies, focus is key to success, and to making their lives easier.

If you're a senior manager, you have limited product management and development resources, limited sales and marketing resources, and so on.  So it's key to pick a target market, a direction for the product, and go after it with everything you've got (assuming you've validated that it's the right direction with some data and early success).

Otherwise, if you go chasing after multiple target markets, go in several product directions, chase all prospects, you likely won't get very far with anyone in any market.

To illustrate this graphically, here's a picture from a blog on Agile Development methods, titled, "If you chase two rabbits, you won't catch either":



Get it?

This is why OpenView Venture Partners is highly focused only on expansion stage software companies, and nothing else.  It helps us be better at identifying the best investment opportunities and then providing unique value add to those companies.  Chasing one rabbit is hard enough!

My colleague, Tien Anh Nguyen, recently sent me an article on Slate titled, "But He Looked Good on Paper", about the changing ways in which candidates for positions at tech startups are screened and hired.  As someone who offers recruiting support to expansion stage technology companies, I am always interested in learning about new ways that other companies are having success with candidate screening. 

A major theme of the article was that Americans will increasingly find jobs not through external recruiters, job boards, and their resumes, but by showcasing themselves online and undergoing less subjected automated assessments.  I have discussed boards which are meant to display software developers' expertise in the past, such as StackOverflow.com, but  discussion boards are now becoming popular in other areas of expertise. 

Slate also predicts that video will become more highly utilized in future recruiting.  According to the article, a handful of Bay Area startups have started using HireHive, a company that offers monthly plans to pre-screen applicants on video. Another startup, RoundPegg, assesses how a candidate will fit into the culture of a workplace. A series of short surveys and analysis by an organizational psychologist can tell the hiring manager whether an applicant will have a problem with the manager or team.  For more information on other types of video and remote interview software that are becoming increasingly popular, check out this earlier post of mine on the subject.

Have a great Labor Day weekend, and Happy Hiring!

So much of expansion stage business-building is focused on acquiring customers that entrepreneurs may forget that keeping those new customers is just as important! With the web making the marketplace more accessible/transparent and lookalikes popping up all over the place, what can you do to keep your customers loyal and happy?


Whether yours is an enterprise model with three-year deals or a SaaS offering with month-to-month contracts, it is all about the service.

Here a few tips to keep clients coming back for more:

- Be a problem-solver: Create a sense of confidence within your customer base, assuring them that you will be there to handle issues/problems.

- Keep in touch: Send targeted and relevant letters/emails to customers to keep them engaged and make them aware that you are thinking about their success.

- Offer renewal discounts: Give customers a way to save a buck and give your business a cash flow boost by offering a discount on an annual subscription renewal (e.g. rather than $1,200 over 12 months at a $100 ASP, offer customers the full year for $1,000 upfront).

- Innovate: Continue to iterate on your offering based on customer feedback through the product management process. This will let users know that you are listening and improve the offering more generally.

At OpenView Venture Partners, we work with our portfolio companies to refine these customer service best practices and maintain long-term business relationships. In fact, we recently held a Customer Service Forum with Bill Price, author of The Best Service is No Service, to develop a 90 day plan of attack for improving the client experience.

What are some of the ways that you keep your users excited about your product? 

As you are figuring out the correct contact model, below are a few things to consider:

• The first day you make a call and leave a voice-mail, remember to follow up with an email. Statistics have shown the combination of a voice-mail and email in the same day lead to a much higher conversion than simply leaving one or the other.

• Try calling the lead more than once the first day (while leaving a voice-mail just once). You don't want to be a stalker and call the lead 50 times, but a couple times is not a bad approach.

• Determine the optimal amount of days between past messages left to reach out and make follow up attempts (it can be as short as one day or as long as 2-3). If you have much longer than one-week intervals in calling a lead back, you may find it difficult to get a conversation.

• Don't give up calling a super hot prospect. Some leads may take 30+ attempts until you get someone on the phone. A lack of response does not always mean non-interest (people are often times busy!). Be persistent and patient -- it will pay off.

• Use a CRM system to automate and track your calling approach. Excel does not cut it these days. Salesforce.com does a good job at managing the outbound contact method through tasks. Additional bolt on systems like Jesubi take it to the next level in terms of automating the flow of follow up calls and messages.

• Have your best outbound callers mentor those on the team that may be struggling. Coaching/feedback from a peer who is in the trenches doing the calling day to day will be better received than by management teams who may not have been there/done that for ages.

Hopefully the above are a few insights that will have you start thinking more about taking your outbound approach to the next level.

-KKF

This post is part of a series that will compose a best practices process on calculating the Cost of Goods or Services Sold (COGS or COS) for a software company. While this series is not meant to be an authoritative guide to all GAAP principles that should be followed when accounting for COGS, it will help a company figure out its COGS and gross profit by product line, geography, etc. This will be especially helpful to companies looking to raise expansion capital, as many venture capital firms ask for this type of information during due diligence. Ideally, it will also allow expansion stage software companies to optimize their sales and marketing spend by investing more resources into more profitable geographies and lines of business.

Software as a service companies that deploy their software over the Internet will have a large portion of their COGS come from subscription and hosting costs. Subscription and hosting costs are typically broken down into the following line items:



Bandwidth costs: Whether a company hosts its application in-house or in a data center, it will have to pay monthly bandwidth fees to providers such as AT&T, Verizon, etc.

Data center costs: Most SaaS companies host their applications on servers in data centers, meaning that they are paying for monthly rent/rack space, along with power and cooling (which often cost more than the IT equipment they support).

Depreciation of data center equipment: If a SaaS company buys its servers, racks, and other data center equipment (instead of leasing it), it will have periodic depreciation costs to include in COGS. There is a number of methods that a company can use to calculate depreciation of data center equipment, and a company should refer to the relevant GAAP pronouncements when determining their depreciation policies. The two most common methods used to calculate depreciation are the straight-line method, and the declining-balance method. Both will be covered in detail in the next post.

Leases of data center equipment: If a SaaS company leases its servers, racks, and other data center equipment (instead of buying it), it will have periodic lease expenses to include in COGS.

Royalties or expenses related to 3rd party software used in data center: If a company uses 3rd party software on its servers, its costs should be included in this line item. If the company subscribes to the software, the period expense is simple to calculate. If the company buys a perpetual license of the software, the company needs to estimate the useful life of the software license (typically between 12 - 60 months), and amortize accordingly.

Royalties for 3rd part components used in product offerings: The exact amount for this COGS line item will depend on the agreement between the software company and the 3rd party component vendor.

Data center staff payroll, taxes and benefits: Many SaaS companies have at least a part-time systems administrator that maintains the company's servers in the data center. The data center staff payroll, taxes and benefits line-items covers cost of these employees.

Credit card processing fees: The vast majority of SaaS companies allow customers to purchase and maintain a subscription to their software by credit card. The credit card processing fees the company incurs belong in this line item within the subscription & hosting cost category of COGS.

Quick background: Oracle was sued on July 29, 2010 by the Department of Justice, alleging that Oracle overcharged the government when it licensed its software.

• How does this work? Well, when a company wants to sell a significant volume of software to the federal government, they file what is called a CSP-1 (Commercial Sales Practices Format chart). On this form the vendor describes their pricing, products, services, etc., by tier of buyers (direct, channel, etc.) and, most importantly, their discount practices. The government wants to know that no one is receiving better pricing for a similar transaction.
• The Case. What happened in the Oracle case (at least as alleged in the complaint) is that the Oracle overcharged the government by selling software to various agencies at higher prices than it was to commercial customers.  A whistleblower (i.e. insider) brought the initial case under seal and the government investigated (which took a few years). By the way, the whistleblower can receive up to 30 or so percent of the award, so there is a very strong incentive to bring these type of cases.
• What could the award be? Let's look at some similar cases. Oracle paid $98.5 million in 2006 on behalf of PeopleSoft, EMC reached a settlement to pay $87.5 million, and Net App reached a $128 million settlement in 2009. 

So what can you learn from this?

1) Commercial Practices Sales Charts are really important, and someone needs to take ownership of them (cradle to grave). I suggest 1 person should be responsible for (a) helping draft the CSP-1, (b) updating it, and (c) ensuring compliance with it. If you read the Oracle complaint, it really looks like people were confused as to what the Oracle CSP-1 covered and what was excluded.

2) You can be audited, and they will look retroactively at your transactions and discounts. Not fun.

3) Get expert help. You should work with an experienced government contracting consultant or lawyer, as this type of contracting can get very complex, very fast. Remember, we are talking about government purchasing regulations here. 

4) The federal government is getting quite acquainted with software transactions and discounting practices, so they will get better at finding violations and bringing these type of cases. 

Any company looking for growth capital or a venture capital investment should take a read, especially if you have a GSA Schedule or will have one soon. This type of compliance issue will also come up when you want to sell your company or as part of your company exit strategy, as buyers are now well aware of this risk and compliance issue (this applies whether or not you are looking for growth equity).  

Resources

 

This blog, "What A CEO Does" by Fred Wilson, A VC really resonated with me.

Maybe it is the picture he used in the blog of my former boss Larry Ellison that sparked a rush of flashback memories that replayed through my head.

Before I joined OpenView Partners, a Boston Based Venture capital firm that invests growth capital in expansion stage software companies, I spent 27 years as an operational executive in the software industry. Thirteen of those years were at Oracle. During the last 5 years I ran North American Sales and was on the Oracle Executive Committee and reported to Larry directly.

During those 13 years Oracle accomplished some amazing things.

I was there in 1990 when the company's revenues exceeded 1 billion dollars, and I was there a quarter later when they had to restate their revenues below a billion dollars and had their first loss since they went public.

I was at the company when Sybase was an actual competitor, and when the industry transitioned from character mode to client server and later to thin client web based systems. I was at Oracle when Larry hired Ray Lane and when Larry fired Ray Lane.

I was in the room when Larry stood up in front of the financial analysts during the .COM boom and predicted that some day real customers, real revenues and real profits would matter again... and the analysts did not get it. I was also in the room when Larry predicted the consolidation of the software industry ... and again the analysts did not get it.

I was part of the executive team that helped transition Oracle's business from a historical 22%-23% EBITDA to greater than 40% EBITDA in less than 24 months, making Oracle the second most profitable software company in the world... and the most profitable software company in the world that does not hold a monopoly. This was when Larry told the analysts that Oracle was going to save 1 billion dollars and again they did not get it... and 6 months later when he got up and told them he was wrong and that we were going to save 2 billion dollars, they just shook their heads. By the way, if anyone wonders how Oracle got the 34 Billion dollars to fund their acquisition strategy, this was what started it all.

As I look back on those 13 years and the time since, the 3 things that Larry has always done as CEO that Fred Wilson mentions in his blog are...

1. Sets the overall vision and strategy of the company and communicates it to all stakeholders.
   
2. Recruits, hires, and retains the very best talent for the company.
   
3. Makes sure there is always enough cash in the bank.

As a CEO, you could do a lot worse than focusing on these three things.

By the way, I am still a shareholder and, as long as Larry is there, I always will be!

All the best!

G

When offering sales and marketing support to our expansion stage portfolio companies, our sales leaders offer many questions around sales techniques, tricks, or methodologies that can be used.   We have all probably read the books and been educated by the "sales geniuses" offering  "ABC--Always be closing", "a few new techniques will boost your sales", or "think positive and overcome your fears of interaction".  These are generally old-school teachers and do not lead to new thinking.

I came across a great article from Ari Galper titled 7 Ways to Stop "Selling" and Start Building Relationships. It really speaks well to the "New Thinking".

Here is the intro....

New Thinking = New Results

Maybe it's time to take a different approach. Maybe we need to seriously analyze our sales thinking so we can identify why we're not making more sales. Take a look at the table below and think about your current selling mindset. How would your selling behaviors change if you changed your sales thinking?

Traditional Sales Mindset: Always deliver a strong sales pitch.
New Sales Mindset: Stop the sales pitch -- and start a conversation.

Traditional Sales Mindset: Your central objective is always to close the sale.
New Sales Mindset: Your central goal is always to discover whether you and your potential client are a good fit.

Traditional Sales Mindset: When you lose a sale, it's usually at the end of the sales process.
New Sales Mindset: When you lose a sale, it's usually right at the beginning of the sales process.

Traditional Sales Mindset: Rejection is a normal part of selling.
New Sales Mindset: Sales pressure is the only cause of rejection. Rejection should never happen.

Traditional Sales Mindset: Keep chasing every potential client until you get a yes or a no.
New Sales Mindset: Never chase a potential client -- you'll only trigger more sales pressure.

Traditional Sales Mindset: When a prospect offers objections, challenge and/or counter them.
New Sales Mindset: When a potential client offers objections, uncover the truth behind them.

Traditional Sales Mindset: If a potential client challenges the value of your product or service, you must defend yourself and explain the value.
New Sales Mindset: Never defend yourself or what you have to offer -- it only creates more sales pressure.

The article link provided above goes on to explain each....good reading and learning!!

I recently read a great blog post by a CEO who went through a six month acquisition process that eventually fell through. But before I send you to his post, you have to go through my thoughts...

While most early expansion stage software CEOs aspire to hit the IPO nirvana... the reality is that most early stage ventures end in three outcomes: an acquisition, a wind-down, or a non-event.

Regardless, both an IPO and acquisition require significant preparation. And the longer you wait to prepare, the more complicated and expensive it gets. I recommend that CEO start laying out their company exit strategy 18-24 months before a desired event.

Assuming you're CEO of an early stage company, here's a sequence of steps you should start with sooner than later:

1. Hire a CFO: I won't dwell on this point, as I've written about it here.
2. Get your financials in order: get your financials GAAP ready. Time to say goodbye to Quickbooks and cash accounting.
3. Build your economic model and operating dashboards: More on that here.
4. Get a financial audit by a reputable accounting firm: there's nothing like an audit to ensure your compliance with basic financial accounting. Make sure to dive deep into the audit firm's assessment of your financial operations and processes for areas that you can improve upon.
5. Get a legal audit by a reputable law firm: in an acquisition, your company will go through a super extensive legal due diligence audit which will uncover all sorts of issues. These issues will delay the closing of the deal. A mini-version of this due diligence typically happens when a company raises an institutional VC round. But in the case of VC audit, companies typically don't do much with the due diligence findings after the investment is done. I encourage companies to do their own audit with their own law firm, and use the findings to make process and documentation changes to clean up their legal infrastructure.
6. Start taking investment banking meetings: there's lots to be learned from bankers that cover your space. For one, investment bankers have a wider lens to your market, to the larger companies in it (acquirers); and the competitive landscape around you. As they get to know your company, they are more apt to bring it up in their discussions with potential acquirers.
7. Get your board of directors in order: more on that here.

As you get closer to being ready for an acquisition, make sure that you allocate at least 12 months to getting there (assuming you get there at all.)

1. Pick a banker that best covers your market: use that relationship to get a perspective on all the possible acquisition prospects, their priorities, their appetite, and how best to engage them.
2. Start building relationships with prospects - start with product integrations: the most effective way to get a perspective acquirer's attention is to demonstrate how an incremental revenue stream can be built for them around your product. So get a product integration built first.
3. Start building relationships with prospects - follow with joint selling: once you have an integrated solution, start marketing and selling it... Then engage the prospect's sales team in the process.
4. Retain the banker for a "soft sell" process: retain a banker to go out and solicit interest in a partnership or "strategic" funding.  It provides the banker with an excuse to reach out and have the conversation, without giving the impression that the company is actively looking for an exit.
5. Take an inbound offer and shop it: This is where it gets tricky, and why you need to have all your ducks lined up before you get to this point. The cliche of "great companies are bought not sold" holds very true. And what I say is that "greater companies are bought in a competitive bid." Ideally, you would receive an inbound offer for acquisition (assuming the offer is not perfect)... and you take that offer and use your banker to shop it around. Which would ideally create a bidding situation that maximizes your outcome.  

Which brings us to this very interesting perspective from Gleb Budman, CEO of BackBlaze. I found his experience to be a great read for early expansion stage CEOs.

April Dunford had a nice article on her blog "Rocket Watcher" on "Avoiding the #1 Startup Marketing Mistake", which is "marketing to everyone". According to her, there are 4 main reasons why start ups should focus their marketing activities on specific targets:


- Targeted Messaging is more effective
- Social Channels work best within community
- By targeting specific segments, there are more opportunities to win and become the leader in those segments
- Success in a specific target builds upon itself

While this is clearly very typical with startups, which are under pressure of establishing some initial customer base and buzz, the same might be said of older companies -- from the expansion stage to the later stage -- or even after an IPO or exit. Here is another typical situation with a more mature company:
 
After successfully growing by selling into a particular segment and establishing itself as the leader in that segment, the company raises a lot of venture capital funding and tries to become a "platform". This is understandable as there is intense pressure to quickly grow and capture the broader market. However, what typically happens is that the company spends a bunch of capital on marketing to everyone, hiring a big marketing department that can do everything from analyst relations, to PR to influence marketing and content marketing.

The company thinks that it needs to think big in order to grow big and compete against the larger, more established competitors in the market. Therefore, it expanded its marketing team and hired marketers who are more suited to large companies. At the same time, it still tries to stay with its roots, and hence the grassroots social media marketers.

A variation of this is when a company tries to define a new product category to differentiate itself from its competitors. With a new product category, the company tries too hard to build buzz and focuses more on creating the new category rather than to sell to any specific target. We have seen this situation backfire on the company as they started to lose their existing customer base while not getting any new prospects signed up, simply because their messaging then becomes too general, "thought leader" like.

If you are an expansion stage SaaS business looking to generate more qualified leads for your sales team, launching a cold calling initiative to supplement other lead generation systems (SEO, email marketing, advertising, influence marketing, etc.) might be just the ticket to catapulting your company's growth into high gear. 

While a well-run cold calling initiative may be great for your sales team's pipeline -- be prepared. It will also be an investment... an investment of time and money. For management teams at the expansion stage, time is money. And money, particularly if you are at the point where you are looking for investors, must be spent wisely. That being said, make sure that you are buttoned up before you kick off something like this so that you are not wasting any of your company's precious resources.

If your goal is to launch a cold calling initiative to generate revenue for your business within the first 90 days, here are 10 things that you must consider prior to kick off:

1. Do you know your target market segment that will have the greatest need for your product/services?
2. Do you know who the key decision maker is within that segment, and what his/her pain points are?
3. Do you have the capacity to build content customized specifically for that segment? (Must haves: email templates, call scripts, case studies, white paper, power point presentations for demos, competitive matrices, etc.)
4.  Do you know which of your competitors are prevalent in that market and how you will compete against these companies (features, cost, services, etc) to win business?
5.  Does your sales team understand the value of adding lead qualifiers (aka cold callers) to the team?
6.  Have you established a hand-off process that will make for a seamless transition of qualified leads from cold callers into the hands of the closers?
7.  Do you have a lead nurturing campaign established for the leads that you find are interested, but not quite ready to be passed along to the sales team?
8.  Do you have a manager with the capacity to train, manage from a productivity standpoint, and gather feedback to improve the process on a weekly basis?
9.  Do you have a resource/service (either internal or external) that will provide you top-quality leads on a weekly basis for your cold callers to call into?
10. Does your team have the patience to build something that may not have short term results, but rather long term results?

If you can't answer "Yes" to every one of these questions, you may want to consider putting off your cold calling initiative until everything is sorted, and resources have been properly designated to support the initiative. You simply can't cut corners if you are expecting immediate returns.

Now, if you have a bit more flexibility and are looking to treat your cold calling initiative as a market clarity research project just as much as a revenue generation strategy (see my recent post about this exact topic), then this type of initiative can have a tremendous impact on your business in the long run from a market knowledge standpoint. If this is ultimately your goal, you've got to figure out the logistic early on -- not a month into the campaign. Your lead qualifiers must understand their roles from the get-go to keep motivation high and frustration low, and their metrics/quotas must reflect this research-driven approach. On a final note, in this situation, point #10 will be very, very important to consider!

An article I read in the New York Times today stated that, according to the National Venture Capital Association, venture capital firms have poured $115 million into location start-ups since last year; most popular of them being Foursquare, Gowalla, Shopkick and most recently, Facebook Places. These location-based apps offer services that allow people to inform their friends of their physical location online, so users can connect with their friends or receive coupons/discounts from businesses.

The rise of such location technology opens up a new avenue in influence marketing. Even though adoption has been largely confined to young, tech savvy urban dwellers, these apps have immense potential for gathering valuable consumer data. Location apps can provide large amounts of behavioral data, which can be used by market researchers to reach possible target segments. I will use Foursquare to showcase how such apps can be used to a researcher’s advantage.

Identify your loyalists: A key part of Foursquare’s interface, for instance, showcases which users have checked in at a given location. From this, a programmer can demonstrate how many times each user has visited, the duration of each visit, locations each user has visited before and after coming to a particular venue, the number of other visitors that user is friends with, and the reach each visitor has. Such information is greatly helpful in understanding and evaluating target personas and understanding the behavioral patterns of heavy users.

Provide incentives: Foursquare does this by rewarding a location’s mayor. A mayor is the most frequent visitor of a location and is likely a heavy user of the service. By providing incentives to the mayor, businesses can keep current loyalists happy through coupons or discounts. Businesses can now visit Foursquare + Your Business to get further information on the program and browse ideas that other venues have implemented.

Information from an app like Foursquare can be used to focus on new or repeat customers; it can be used to target and treat customers with heavy influence and reach differently; it can be used to be creative with reward strategies, for instance to reward those who recommend Foursquare to a certain number of friends and their friends sign up, and so on.

However, for all the attention and money these apps are getting, only 4% of Americans have tried location-based services, and 1% uses them weekly, according to Forrester Research. Delving more into the statistics reveals that 80% of those who have tried them are men, and 70% are between 19 and 35. So, this is far from being mainstream. The loyalists using the app are a far smaller subset of the percentages I mention above. Also, the users seem to be skewed toward men.

The young user base is promising when planning for future sales support and marketing. But at the present, even though location apps can provide a new, deeper outlook into consumer behavioral data, they are very restrictive. The overall user base is small; hence the target segments are small. Additionally, people have qualms about sharing their physical location online, even though they might be comfortable sharing other information on the web. So, even among young people there will always be resistance because of security issues. May be for specific information like location, there HAS to always be some incentives. May be rewards are the only way of making such app-use seem worthwhile, because they can prevent the privacy trade-off from crossing consumers' minds.