Managing management

Let there be light.
You've successfully raised the cash, now you have to execute.
But first a thought. What kind of manager are you going to be? One that is passionate about his venture, meaning, getting the product out in perfect form, winning deals at all costs, pushing your sales and development teams to their limits? Or perhaps, A manager who is passionate about the people he has employed, keeping them happy, focused and motivated to the cause, enticing them to commit to every item in your execution plan.

Whichever your style, you'll find that at the end of the day its all about getting the young company from point A to Z (Z stands for zillion dollar exit). However or whatever type of manipulation or salutation you adapt while taking this long and bouncy ride, you'll need the basis or the foundation of your firm to be in line and in synch with your cause. I refer here to senior management. Recruiting the right people for those few senior positions, will determine the ability of the company to plan, execute, produce, deliver and deploy on the one hand and attract, market, prove and sell on the other. And let's not forget the effort put in maintaining a healthy and sustainable relationship with your clients. Without the right people on board these goals will not be reached.

 Who should be recruited?

Top notch tech wizards? Perhaps a sales ace? Hot shot CFOs? MBAs? PHDs?

I believe in two things when recruiting. Chemistry (a) between the candidate and yourself is the basis for the relationship. Remember this journey is going to be long and bouncy. A little analogue I use is, recruit the guy you'd like to find sitting next to you on that transatlantic flight. Everybody has flaws and knowledge gaps and no one is perfect, but if you get the relationship right, most problems are resolved in a decisive and productive manner. It's vital that your company solve its issues by discussion and not through thousands of pathetic emails. The second, is that your team as a whole must cover all needed skill sets and characteristics. You'll always need the one that is business minded, the creative one, the one that can present the sales pitch and of course the tech guy. And then there is the pedantic, the lazy guy that always has the solution, even the nasty boss type is needed to be mean when everybody is late on deadlines. You need an array of skills and characteristics at the top of your organization each covering for the other's gaps. Remember, no one is perfect and if someone thinks he knows it all, get rid of him today. The company must be driven by senior management as a team.

Teamwork at the top means teamwork throughout the company. Good relations, productive thinking and a rainbow of skills and characters will all shower success to your newly established firm.

 

 

 

 

Timing Your High Risk Investments

Is now the time for high risk, post seed investments?

Has the point in time come, as the world's biggest financial institutions, those unsinkable Titanics of wealth and arrogance sink into the abyss of commercial banking and we all return to basics, to remember that cash is always, but always the king of capitalism?

Have the past few weeks been a lesson to us all that investing your hard earned dollar must be backed by research, due diligence, a belief in your investment strategy and focus on what's best for you? Perhaps?

So why bring up the notion of placing a bet on a hotshot out of college looking for a few hundred thousand dollars to support his dream? Why should you support a company in its earliest stages, so vulnerable to the market's lashings, one that is destined to shut its doors, if you don't throw them that badly needed life line?

To answer the above questions, I'd like to take us all back a couple of years, and share with you my experiences. This was when everything was happy and dandy, software was being bought, consultants were doing marvelously well, global strategy was the word and those of us in the enterprise software delivery business, had the feeling that finally, we have a sustainable line of business, that we have joined, and are now officially part of the 'old economy'. We have come of age and have jobs that our parents can be proud of!

2005. We were doing well. We had cash in the bank, we had software for investment managers, money managers and account managers.

At least we claimed we did. Our product was young, our team was inexperienced and we were laking the 'traction' we were bragging about. Lest not forget our robust platform, oh how robust was it! You could envision Lehman's last weeks collapse, if on only you had bought our super-easy-to-plug-in snippets of java code. These little rascals could compute anything.

Then, one bright sunny spring day, a client. I will quote a senior member of our management team at the moment we got the news: "Oh shit! A client!". This was a real life, no-joke customer. A commercial bank who's IT department demanded documentation, they cordially requested to see our development standards and best practices articles, they even sent a team of astute individuals to do a real-live due diligence process in our offices.

We hastily got our act together, worked till late, endlessly wrote documentation on every nook and cranny in our product, invested all the time and energy in nurturing and keeping our one and only victim happy. We had a project plan. A joint task force was put in place. Collecting the business requirements from real business people (the chosen ones who were going to use our product) was underway, our development teams were scrambling to produce pieces of functionality, anything and everything we ever promised, lied about or claimed we had was being developed. VCs were visiting regularly, eager to jump on the band-waggon. We were on our way. Out came the Alpha version, then we released the Beta version, we let our client test drive the application. Response was good. Dates were set for delivery. All was going as planned. As for sales efforts, our pipeline was up to the rim. 10, 50, I remember a discussion where we had "250 money managers knocking on our door". We had it made! We moved to nicer offices. We had our company cars replaced with newer models. Was this reality? Is this another bubble? How long can this last? The answer comes abruptly, slams throught the window and is dumped on your desk. These good times last until the market is fed up, it can go on until there that delicate ballance between supply and demand is lost.

The credit crunch swung in with the first strike. The sub-prime crisis was here. At first we were too arrogant to believe that this would effect us. As I said before, we were on our way to an exit and these customers are merely holding us up. That was the state of mind in our hallways.

Then conference calls with our client became shorter, responses were not prompt as we were used to, dates that the client had committed to were slipping. Work orders could not be signed.

Something was wrong. Strike two.

Rumours spread that 15,000 Wall Street jobs will be lost in the next quarter. Okay, we thought, that's their jobs. Not OURS. We were foolishly blinded.

Then we took a new direction. "We will support what we have built till now" (just in case this crisis is of someones imagination), "shift our focus on a product line that will ensure our company's glorious US$250,000,000 exit strategy". We even got our backers blessing for this. But we had missed the train. The ship set sail. The ball was in motion. No one was answering the phones, no one was interested. Wall Street was playing it safe. We were doomed. Strike three and you are out!

The rest was pretty straight forward and quite pathetic. In came a hot-shot CFO that the VCs had assigned. "Shutting down a business is not something that anyone can do" he claimed. All the new laptops were rounded up and stored "so that we can sell them off at a good price". "We care about you all and will do everything in our power to find you another position at one of the many 'cutting-edge', super-dooper companies found in our investors portfolios". "It's best to return the money to our investors rather than burn it off" were the mantras. If management could play it through a communist cold war era speaker system in the office they probably would have. The doors were shut. the lights turned off. The laptops were nowhere to be found.

What went wrong? We had the product. We had a good group of individuals on board. We even had the cash.

Was it bad timing?

Without being at the right place in history at that precise point in time, where that professional is walking past your booth at some mid-west conference, catching his eyes and luring him to you, it can't be done. Timing is of the essence. Introducing your product to the market must be as the wave is building beneath the ocean's surface or when the earth starts trembling before the volcano erupts.Can these periods in time be identified? Probably not. There are unexpected events, some of them unforeseeable. Acts of god almighty himself. Introducing your product to the market before a huge credit crisis also might go down badly.

Attain this to timing or to bad luck. Bottom line is - there is a good product out there, a good team of people. Why wasn't this shelved until the storm blows over? There will be another opportunity. The market always comes around. Recessions doesn't last forever.

They say that "When there is blood in the streets its time to buy".

Our start up was valued at something close to nothing the day that it was shut down. Had our product be better timed to the market, and if we had a little more of heavenly intervention we could have been a bonanza. Entrepreneurs find it hard to raise capital at the beginning of their venture, so why is so hard to raise the capital when you have a working product that has had the markets interest, a sale or two and all you really are out of, is - luck.

My experience tells me that it's a lot more difficult keeping a client then winning over a new one. Why isn't this the same for these start ups? They are going for a bargain price. "Buy cheep and sell overpriced", isn't that what is taught at business school?

While the market is licking its wounds and is collecting itself, these companies can use the time to enhance, enrich, mature and further develop their product. Come out fighting in the next round. These guys are down for the count and haven't been knocked out or disqualified.

The investors money will probably never be recovered and they have lost out. Remember - bad timing. It was the wrong investment at the wrong time.

In the event of buying into such a firm, at this point in time, would the money be going down the tubes? I think its a better bet than what it was to start with. Its cheaper to invest as valuations fall due to a lack of funding available therefore getting more for the dollar. The investor would now be owning a piece of a wiser, more experienced team, a mature and stable product 'that's been around' and as the markets rally, a second attempt at timing your product correctly.

Isn't that a less riskier investment than before?