Tech Banker

Private Company Best Practices

Blogs and podcasts (and likely soon video blogs) are being used by an increasing number of venture capitalists as their mouthpiece to their constituencies.  Brad Feld is certainly one of the pioneers and he has begun to organize a blog network of venture capitalists via Feedburner.

One incredibly useful form of post is under the theme of best practices.  Brad Feld has his Term Sheet Series of posts and now Pascal Levensohn and his partners at Levensohn Venture Partners has begun a series entitled VC Inside Out.  I'm sure there are other examples as well, but the point is that the amount of sharing of insight and perspective gained from experience is unprecedented.

Thanks for all who believe sharing is better than hoarding knowledge.

Convertible Preferred Stock

I ran across a terrific summary of preferred stock structures for private companies this morning published by Alexander Muse.  It's a good primer on the subject.

Advice on Software M&A

Perhaps a worthy read.  Brad Feld reviewed a book entitled "The Strategic Guide to Selling Your Software Company" by Bill Venema.  I'll share my personal thoughts when I get a chance to review the book myself.

The 80% - 20% Rule

Andy Hayler, a software entrepreneur and generally thoughtful guy, reminds us of one of life's Ironic truisms, 20% means more than 80%.

Andy points out that Microsoft is methodically making inroad into the business intelligence application category.  Andy's core thesis is as follows:  Microsoft may never field a product offering that offers the depth of features and functionality as do Cognos and Business Objects, but it really doesn't matter as "most users only take advantage of a fraction of the features of a BI tool anyway."

This is the exact same dynamic that is occurring all over the software sector.  Think Salesforce.com vs. Seibel (Oracle), Google spreadsheets vs. Excel, MySQL vs. Oracle, Linux vs. Unix, Writely vs. Word, ...  The fact is that 20% of the functionality provides 80% of the value.   Put another way, 80% of the market only needs/wants 20% of the functionality.  The irony is that software vendors are notorious for adding features over time. As a rule, it's function that most users don't want, need or care about.  Further, the additional features are not typically monetizable!  If anything, its a strategy to keep pricing from eroding, not pull more $ from the client.

Perhaps all software entrepreneurs, VCs and big company corporate executives should consider their strategy within the 80/20 rule.  Is the software industry product/business model all wrong?

Jerry Weissman -- Presentation Coach

Jerry Weissman is a legend.  During the 1990s he was a required stop for all aspiring technology IPO management teams.  That is if they were smart (and could get a slot in his schedule).  Jerry is a presentation coach.  He's a bit formalistic, but when your formula works, it means its a good formula.  His formula works.  One great example of his technique that I remember well is he advised that when asked a question, rephrase it back to the questioner before answering.  It's a wonderfully effective technique to show that you understand the question, get clarification if required and gives you time to formulate a crisp answer.

Well, yesterday Guy Kawasaki's blog brought Jerry back into our minds.  It turns out that he is prolific blogger!  That made me smile as apparently an old dog (take that as an respectful term in this case) can learn new tricks (technologies).  His post on being a great panel moderator is terrific.

The Challenge of Focus

We believe venture capitalist Seth Levine of Mobius is right on in his post entitled "What DON'T You Do?"  As he points out, most effort is made to define a company's focus, which is essential, but turning the question inside out helps to define the line between okay and not.  Isn't this subject the essence of probably 70% of the conversations that go on within an organization, particularly a young organization which is still defining itself?  Whether it's sales, product, marketing or management, the same question is always being considered; where do we spend our money and more importantly our time.  Seth's approach is a good tool to keep in mind.