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.


Feeling Blessed

September 11, 2013

I did not wake up today remembering that it was 9/11.

Instead, I woke thinking about my blessings: my family, my health, my supportive wife, my entrepreneurial journey (which I try to remember is a blessing despite the wild ups and down of the business and my psyche). I am so incredibly grateful for these blessings and so many more. I am trying to use gratitude as a way of channeling my energy, anxiety, and ADD tendencies. I think it’s working.

But realizing that is it 9/11 prompted all kinds of other feelings and memories:

Twelve years ago today, I was attending a board meeting as a VC.  Another board member was attending the meeting by phone and alerted us that a plane had flown into the World Trade Center. We all thought it was a small craft and kept going with the meeting. When he informed us that another plane had hit the Center, we adjourned the meeting. I spent the afternoon and evening watching the news with my wife, feeling numb and helpless.

-Realizing how thankful I am that I am in good health. I am rather lucky that my genetics enable me to keep my weight stable despite not working out anywhere near enough and with high levels of stress. I really need to change my workout pattern, for stress and sleep benefits. Today I re-committed to that.

-I am trying to enjoy the journey, the learning, the personal growth, especially that which comes from being an entrepreneur.  As a goal driven person, it has been quite a challenge for me to embrace the uncertainty, the downs (that of course go with the ups), and the feeling that, some days, I don’t know what I’m doing. This has arguably been one of the toughest things I have ever done. Through another blog, I came upon these beautiful words from Antonio Machado- “Traveler, there is no path. The path is made by walking.”

-Thankfully, 9/11 didn’t impact me directly too much. But thinking further about my blessings has heightened my understanding of how precious my relationships are with family and friends. I have not done a particularly good job in including the friend part of my life with business and family. It’s tough to do, but I am increasingly realizing that it is something I need. As driven as I am, and as much as I attach self-worth to my work, it is family and friends that really give life meaning. I don’t have enough friend connectedness right now. That needs to change.

Is it a new era or noblesse oblige?

August 16, 2013

In the last week, we have seen 2 major newspaper companies, The Boston Globe and The Washington Post, acquired by wealthy business people.  John Henry in the case of the Boston Globe and Jeff Bezos with The Washington Post.

The revenue declines, struggles to retain readers, and high cost structure of the print newspaper business have been well documented and I won’t go into them here. But in trying to turn around these businesses, there are not obvious examples to follow, so it’s a bit of a Brave New World.

Can these owners make money in the news business (I won’t call them “newspapers” anymore) with original news content, through a digital-only or “digital primary” business model? What areas of news or content will they try to dominate? How important is the brand? The Post has an incredible brand in politics, The Boston Globe does in local sports and local news, but there are so many more competing options for Globe readers these days.

Where will the revenue come from? Not from classifieds, not anymore, not even online. What Monster and Autotrader did to newspaper print classifieds, Indeed and Craigslist did to Monster and the online classified business. That toothpaste is out of the tube…

It would seem as though there should be revenue available through local search and buying intent, helping local small businesses reach large swaths of local consumers. News companies still have large groups of local consumers reaching their online properties, but they monetize this audience through banner advertising that is not targeted and has very low CPM.

One thing Bezos knows is personalization, and that is good for news companies because they do such a poor job of it today. As a fairly regular reader, I get lots of banners and they are pretty generic. I almost never notice or click them.

Bezos is an amazing innovator. But how much of that can he push as an owner rather then CEO?

News organizations should be able to make this equation work- Local business relationships + local info + deep personalization = local commerce That business model agenda would help The Post, but not Amazon, since it competes with local merchants. So we’ll see how Bezos’ manages this conflict, or even if he views it as one.

With John Henry, he has proven to wring extra revenue out of the RedSox so we can expect he’ll try to do the same with the Globe. But owning the team, a cable channel and the major news company is a conflict in it’s own right. Maybe the play is with advertisers, to give them multiple channels. It will be interesting to see how the Globe and the Red Sox co-exist and also how NESN factors in.

Of course, all of this could simply be a case of noblesse oblige regarding  these news institutions.

The “Hoosiers” Guide to Startup Success

November 13, 2012

ImageBasketball season is upon us. I am a big basketball fan and I also coach my kids’ teams, so I am pretty attuned to the change of sports seasons. As both a coach and a fan of the college and pro games, I am pretty psyched.

As a coach, I am starting to think about what my practice plans will be, the offense and defense, how to teach and drill but still keep it fun.

One of the great things about basketball is that the game has flow and rhythm, it is not just a series of plays that start and stop like football and baseball. One of the keys for me in coaching is to teach the kids how to read and react to situations to keep things flowing. Most baskets are not scored from the initial play but from a reaction to the defense or by being opportunistic, like getting an offensive rebound.

As I reflected on it, I was struck by the similarities between basketball and startup success:

You need a great team to achieve success.

Stars make it much easier to win, but only if they blend in to the rest of the team. (See the 2008 Celtics team for proof of that)

You can win without stars (or beat teams of stars) if you execute perfectly. The movie Hoosiers shows us that.

No matter how good your plays or your plan, reacting to the situation is more important. Plan B, C, D and beyond are crucial. This is why the best offenses are not about running a play, they are about a framework for scoring. Plays and systems are just guides, ultimately you need to think on your feet and react in the moment.

All teams need to play offense and defense. Strategic planning is often about thinking “what if” enough times.

All players can improve skills and fundamentals to help the team win. Teams get better when individual players get better.

Tenacity and scrappiness can take you a very long way. In basketball, rebounding and getting a loose ball often make the difference in winning. In startups, you get told “no” a lot more than yes—from customers, investors, friends, you name it. But the most successful entrepreneurs power through all that.

Early Stage Business Development

October 19, 2012

Rob Go of Nextview Ventures had a blog piece about basic marketing for start-ups that I thought was pretty accurate and it prompted me to think about doing something similar for business development.

So here goes, directed to startup founders and early stage CEOs.  What is business development for startups, really? You think you should be doing it but you’re not sure exactly what it is or means.

1. What are your objectives?

You are severely resource constrained, but partners and alliances can be a very powerful accelerator for your business. This is because you probably don’t have a huge sales team, and some potential partner already has the customers you want. By working together with them, you may be able to acquire those customers more quickly and without the need for a huge sales team.

  • Find channel partners to produce more revenue
  • Make your product more salable by integrating it with the other pieces customers will want
  • Find other products to sell along with yours (you control the customer)
  • Find an acquirer (usually starts with one of the above), also called “date to marry”

2. Who is your team? Do they have the skills? Do they have the time? How are they compensated? Many times, CEOs ask sales people to take on this task and there are a number of reasons why this can backfire. It can also work great if you carve off dedicated resources, give them a different time frame (business development deals take longer than other deals), and a different compensation plan.

3. Prioritize your possible partners

There are a ton a possible partners out there, and your board and advisors will be throwing more names at you (“You guys should partner with XYZ Corp.”) Be brutal in prioritizing based on the factors that mater most to you, either revenue impact, market share, brand name, etc.

4. Outreach- like a sales pitch

This IS sales, so prepare like it. Get a warm intro to the partner if you can. Know what your value-add is to the partner and what your company will do for them. Do your homework. Have a special pitch prepared that is different from your normal pitch.

5. Structure

Start with a basic term sheet, but be conscious that you may want to replicate this so be wary of highly beneficial terms like exclusivity, equity, market standoffs, “most favored nation,” and the division of effort between the two companies required to get the products to work together

6. Tools & Process

Know how you plan on tracking the leads that come in, either your system, their system, or both. You may need to change your CRM or other tools.

7. Revenue generation

You may be joint-selling, but most likely one company will be primarily responsible for turning leads into paying customers. Whichever that is will need marketing and sales support, product marketing, training, pricing, dispute resolution, etc. They will need a “go-to” person or people for all of these things. Typically this is a Relationship Manager. It may be the same person who closed the partnership, but it may not. This “down stream” activity is THE key difference between BD and sales and why great BD people can wear so many hats.

8. Assessment

How is the partnership doing in generating awareness, leads, and revenue? How much has each party invested? Has each party done what they said they would, when they said they would?

9. Rebalancing your efforts

Periodically, it makes sense to think through your biz dev strategy and look at all of your partners. Certain partners will be more important than others. Make sure you treat them that way and be prepared to terminate those that don’t perform, or at least to allocate fewer resources to them.

Done right, business development can be a huge accelerator to early stage companies and provide important leverage to your overworked team.

Is it Morning or Evening?

June 13, 2012

Is it Morning or Evening?

In the last few weeks, two VCs that I respect have published blog posts with vastly different views of the start-up world. On the optimistic side, Mark Suster, General Partner at GRP Partners, argues that “It’s morning in Venture Capital.” On the pessimistic side, Jo Tango, founder and General Partner at Kepha Partners, points out that we are likely at a market peak given that start-ups are hot among the MBA crowd.

Suster is actually refuting the “VC model is broken” analysis of the venture industry. He argues that conditions over the last 10 years were anomalous, and that returns for the venture industry should be strong again. (Hence, “It’s Morning in Venture Capital”). Suster’s primary arguments are that the number of start-ups, the number of online consumers (20x higher), the improvement in exit environment, the proliferation of wireless and broadband create an incredible environment for startup value creation. Further, he highlights that various digital interactions and apps are “payment ready” and that we’re all socially linked as additional accelerators.

According to Suster, it is the best time in history for innovation and technology venture capital.

Jo Tango, on the other hand, takes the contrarian point of view regarding start-ups. Although he does not provide much data, he points to the ebbs and flows of MBA interest in start-ups that can occur, most specifically during the last boom and bust of 1999 and 2000. Basically, because start-ups are cool, and MBA interest is sky-high, it must be a bad time. “When MBAs find a space ‘hot,’ you’re near a market peak.” He warns prospective founders to be prepared to take drastic measures.

These two VCs are not arguing the exact same point and counterpoint, but the positions are not hard to juxtapose. After all, if it’s a great time to be a VC, it should be a great time to be an entrepreneur.

There is certainly an element of truth in both blogs. The market forces that Suster cites are very powerful, and he didn’t even touch on the drive to modernize enterprise systems with more user friendly technology (Salesforce, Box, Google, iPads, BYO mobile, etc.). Then again, the proliferation of start-ups, the rise in valuations, and the mediocre performance of many Internet IPOs should provide a dampening effect and could even portend a peak.

I think we should push for an online debate…

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