Financial Plans for early stage investors

October 30, 2013

This is a follow up to my prior post ‘Do you need a Financial Plan to Raise Seed Capital?’

I had a number of entrepreneurs ask me what I meant when I described investors wanting to see that the entrepreneur understands the levers of their business. Specifically, people have asked about the “levers” of your business. Simply put, the “levers” are the critical factors that make your business run.

In an Internet media or SaaS company, they might be:

  • Arrivals (consumers or B2B prospects who land on your web site)
  • Conversions (number of people who sign up for your site)
  • MAU, DAU (Monthly active users, Daily active users)
  • Monetization- How do you (plan to) make money from your users? advertising (CPM, sponsorship), premium subscriptions (% who subscribe, price point). What are the assumptions here? Are they reasonable given other similar businesses?
  • Churn- how many users leave the service
  • Marketing Costs- how do you get users to know about you? Paid advertising? SEO? Social media? Costs of development? Costs of advertising?
  • Sales expense- If you’re a SaaS business, do you plan to use sales people or are you freemium? If you use sales people, what will you pay them? How long will they take to ramp up? What quota will they carry? Will you upsell these customers? David Skok of Matrix Partners has written some great, in-depth blog posts about SaaS scaling here.

There can be a ton of complexity if you allow it. To reiterate a point from the prior post, the point is NOT that you have a complex 5 year financial model. It will certainly be wrong, and investors know this. The point is that you have a handle on the KEY metrics that will allow your business to grow rapidly.


Is Microsoft Giving Up?

September 19, 2013

Yesterday brought news that Microsoft is raising its dividend by over 20% and allocating $40B of its cash horde to buy back its own stock.

Rational stock market investors and business school graduates will probably applaud the move. Generally speaking, it is better for a company to give money back to shareholders through dividends or buybacks rather than spending it on uncertain initiatives with unknown paybacks. That is true in many industries and I’m sure we’ll see Microsoft stock move up as a result.

However, Microsoft isn’t in most industries, it’s a technology company. Technology companies are supposed to make bets on uncertain initiatives in the hope of producing exceptional returns. In consumer and enterprise software, consumer entertainment technology, Internet media and search, and consumer and enterprise communication (and mobile phones and software), the world is changing rapidly. Competition is coming, and coming hard. And many of Microsoft’s emerging businesses, like Skype, Bing, Windows Mobile and Xbox are not dominant and could use additional investment or influx of talent from acquisitions.

By moving forward with the buyback, Microsoft seems to be signaling that it does not intend to invest further in these businesses, nor does it want to acquire large technology companies to pursue new talent, new technologies, or new ideas in order to stake a leadership position in an emerging area. (To be fair, Microsoft will still have billions available for acquisitions of smaller innovators). The company has been playing catch up in mobile, in search, in SaaS, and in consumer platforms like tablets.

The combined buyback/dividend raise seems to me like a very strong signal that they won’t invest internally NOR will they invest externally. While the PC isn’t going completely away, and Windows and Office will continue to generate substantial cash flow, it seems quite clear that Microsoft isn’t sure how to pursue dominance in any of these emerging areas. While they did just spend $7B to get Nokia’s mobile business, I’m not sure exactly what they got for it.


Announcing Bullhorn Reach

February 11, 2011

I am very pleased to announce our latest innovation at Bullhorn, Bullhorn Reach. Reach helps recruiters leverage their social network connections and search engines to recruit talent and develop new client business. Even if you’re not a recruiter, if you do any hiring, you should check it out.

We have had some users in a private beta program testing it out and we are now opening the beta. You can sign up for a FREE account by clicking here. After you’ve signed up, we’ll ask you to spread the word. If you get three other people to sign up, we’ll expedite your account activation and you’re in. Don’t worry, everyone will get in but we’re adding people a bit at a time to make sure they have a great experience.

There are some pretty amazing features in there even if you’re not in a agency. The Articles function lets you publish interesting content out to all your social networks at once. Reach Radar provides you with insight into your social network

If you’re on the fence about signing up, here’s what a few early Bullhorn Reach beta users have to say:

“I love Bullhorn Reach” – Daren Pedley, Thornley Corporate Solutions Ltd. (UK)

“I LOVE this feature!!!!” – Roni from New York, on Reach Radar

“I am receiving several great candidates every day through Bullhorn Reach via Facebook and Twitter” – J.K. from rom New Jersey

“I received 4 job orders with Bullhorn Reach!” – Recruiter from Nevada


Wikinomics in the Recruiting Industry

September 24, 2010

The breakthrough book Wikinomics demonstrates how changes in technology and demographics led companies to reach outside the boundaries of their traditional organizations. Much like eBay created a giant ecosystem of buyers and sellers and LinkedIn has created a huge group of professional networkers, businesses of all types are collaborating with partners to improve revenue and lower costs. This trend paired with the natural networking structure of the recruiting industry has me think that it’s only a matter of time before change of similar type and magnitude reaches our industry. Here are 5 core reasons:

Reach

How many people do you reach in a day? A week? A month? Whether you are running a full desk, strictly recruiting or bringing in new business, success requires you to constantly increase your reach. The proliferation of powerful sourcing technologies, bigger job boards, and social media channels mean that not only you, but your clients and competition have access to more candidates than ever before. The quality of your reach is vital.

So what if it wasn’t just you? What if you could tap into thousands of other recruiters who have direct access to millions of candidates? That’s Wikinomics.


Speed

Even if the right candidate is out there somewhere, alone it may take you a long time to source her and then of course there is the screening process.  In today’s competitive recruiting world, speed will make or break you.

What if you could collaborate with other firms to gain fast access to the most qualified candidates for your client’s open positions?  That’s Wikinomics.

Flexibility

Today’s uncertain economy makes it difficult for recruiting firms to discern when to hire new staff and which side of the business (recruiting or sales) should be staffed up first.  In 2006 we hired frenetically and in 2009, the reverse.

What if you could run your business with outside resources, accessing account managers and recruiters only as you need them? That’s Wikinomics.

Scalability

As more and more firms look to expand geographically, the cost to do so and risk associated with breaking into new territory is significant.

What if you could scale your business by leveraging the area’s local established recruiting professionals without having to commit to the hiring overhead costs? That’s Wikinomics.

Technology

In the past, it was difficult to work with other firms because of technical limitations. It was hard to find other firms, hard to know what they specialize in, hard to communicate, and hard to trust them. Online communications advancements bridge this gap.

What if collaboration could be supported by a technology that would enable you to connect and communicate, while improving confidentiality and ethical behavior? That’s Wikinomics.

The pervasive growth of Web technology has enabled huge advances in personal and business “mass collaboration.” All types of industries are seeing advances including telecom (Skype), biotechnology (human genome project), classifieds (eBay), content (Wikipedia), software (Linux, Firefox), and retailing (Amazon reviews).  Working with hundreds or even thousands of other recruiters will enable you to grow faster.

To help recruiting and staffing professionals succeed in this new reality, Bullhorn recently launched PowerFill, a network of recruiters supported by robust collaboration technology. Much like the Multiple Listing Service (MLS) helped transform the real-estate industry through firm-to-firm collaboration, PowerFill helps staffing firms collaborate to increase their revenue and bottom line.

To read the original post, click here: http://bit.ly/cxN06J


Introducing a professional network for recruiters

August 19, 2010

I am really excited today to announce the public Beta for PowerFill, a product that I helped to spearhead at Bullhorn. PowerFill is a network of hundreds of staffing and recruiting firms working together to fill jobs and place candidates. PowerFill network members use our new, rich collaboration tools to securely exchange information about jobs and candidates, messages, contracts and other information.

We created PowerFill to help staffing and recruiting professionals with one of the largest problems they face: low fill rates.

By collaborating with other firms in the network, PowerFill users can:

• Make more placements to improve their top and bottom line
• Improve customer satisfaction by increasing fill rates and covering more of their business
• Gain efficiency by using sales or recruiting resources from outside of their company. PowerFill lets you focus on what you do best.
• Take control of the customer by filling more of their clients’ orders, allowing for more exclusives and orders.

To see the entire announcement click here http://bit.ly/9gmatw or www.powerfill.com


Microsoft STILL Doesn’t get it

June 28, 2010

Just when you think Microsoft may start to get the Internet, they dash your hopes again.

They just don’t get it.

In the most recent Business Week magazine, Steve Ballmer was interviewed about opportunities in Asia. He commented about the problems of what makes a country interesting and about the problems Microsoft has with software piracy. See the interview here http://bit.ly/bjZxOu

Two things really stood out to me:

1) On the question What excites you about Asia now? Ballmer answered, “Two things make a country interesting… One, they buy a lot of personal computers…”

Note that he didn’t mention mention Internet access or Smart Phones or broadband penetration. Just personal computers. I know Microsoft makes a ton of money from Windows and Office, but emerging markets and emerging technologies aren’t going to function the old way. The old metrics simply aren’t going to cut it. How could I ever believe that Microsoft cares about Search, or about SaaS, or Office in the cloud when the CEO doesn’t even mention mobile or the Internet when discussing opportunities in Asia? There are over 750 million mobile phone subscribers in China alone.

2) The second thing Ballmer comments on is the issue of software piracy in China. I won’t diminish the issue of piracy, because it is a real issue for all forms of IP. But Ballmer’s comments highlight how little Microsoft understands software as a service (SaaS). In a SaaS model, the software is typically paid for over time and accessed via a browser. SaaS doesn’t eliminate piracy, since users can share user names and passwords, but it does reduce it substantially. But Ballmer doesn’t think of the world this way.

They Don’t Get It.  Why Does it matter if they get it? Because Word and Excel and Outlook are industry standard tools, and they would be so much more valuable to all of us users if Microsoft did get it. If I could access all my documents easily in one place. If I could sync all my contacts easily. If I had a truly unified “In Box.”