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Can a VC sit on more than 10 boards without f***ing up?

Jul 22nd, 2010
by rlucas.
3 comments

[Update: the conversation referenced below was with Scott Austin of the Wall Street Journal; he has written an article about the subject. In it, he quotes some VCs that have well over ten board seats, including Forest Baskett of NEA. I know Forest only through his and his firm's reputations (both stellar), and I emphatically do not mean to impugn his board service, commitment, or professionalism. That said, I can't back down from the math below and I must suggest that overloaded VCs necessarily give some of their boards short shrift.]

I had an interesting conversation today about VCs and board seats. The essential question is: how many board seats is too many?

Happily, the math involved here is pretty low-key (algebra, the highest level of mathematical reasoning to which VCs are required to aspire).

One of the best VCs I know always aspires to be the lead investor. Being the lead investor means you’re the de facto coach, quarterback, and ringleader for that round’s investor syndicate (and likely the entire board). He also tries, both as lead investor and as board member in general, to be a coach, if not confidant and mentor, to the CEO. This is all in addition to the normal duties of a good board member: meetings themselves, prep for meetings, often board dinners the night before, regular if less frequent contact with non-CEO executives (diligence and prudence), recruiting etc., and of course, any audit/comp committee work.

What kind of time does this take, on a monthly basis (4.3 weeks/month)?

  • Weekly CEO calls: 4.3 * 30 min = 2.15 hrs
  • Board meetings q 6 weeks, plus prep: (3 hrs + 1 hr) * (4.3 / 6) = 2.87 hrs
  • Massaging the egos of other board members before/after: 30 min * (4.3 / 6) = 0.36 hrs
  • Monthly CFO or other exec calls: 1 * 30 min = 1 hr
  • Executive recruiting (2 major searches a year, taking 10 hours min. each): 2 * 10 hrs / 12 = 1.67 hrs
  • Committee work (2 meetings a year, taking 3 hours min. each): 2 * 3 hrs / 12 = 0.5 hrs
  • Go to one industry conference a year: 8 hrs / 12 = 0.67 hrs

This is the bare minimum theoretical lower bound that you can consider as the time requirement to be a good, lead investor VC board member: 9.1 hours per board, per month, or just about 2.1 hours a week.

That is for the perfect, steady-state, frictionless world: board meetings are in your town at your firm’s offices (no travel), you do not raise a round, and there are no crises. A more realistic assumption would be to add:

  • Meeting travel q 6 weeks (MINIMUM, even driving up the 280 from Menlo Park to the city takes some time): 1.5 hr * (4.3 / 6) = 1.1 hrs
  • One crisis OR new round per year: 20 hrs / 12 = 1.7 hrs
  • Actually “adding value” like you said you would (soliciting customers, buyers, investors, etc.): 2 hrs /month = 2 hrs

So the real-world minimum adds another 4.8 hrs / month, bringing us to 13.9 hrs /month or 3.2 hrs / week.

How much do VCs really work? I think it’s fair to suggest that VCs work at least as much as other ambitious but affluent, socially-encumbered, and non-hourly-billable professionals: probably on the order of 50-60 hours a week. Let’s call it 55, which would reflect the combination of 10 hour days, 5+ hours each weekend, and a long and/or exotic-enough vacation each year to brag about with the other nouveau-affluent in your social circle.

The real-world catch here is that VCs have to spend a minimum of 5 (and as high as 12) hours at weekly partnership meetings. Let’s call it 6 hours/week to be charitable.

55 hours total – 6 hour partner meeting overhead = 49 workable hours.

49 workable hours / 3.2 hours per board (real world minimum) = 15.3 boards.

So there we have it: 15 boards is the upper bound of what a VC can probably sit on. HOWEVER, this assumes 100% of his working capacity is devoted to board work — nothing here for new deals or fundraising (or for other exotic and occasional pursuits, like strategic planning, learning and research, or leadership and mentoring of junior personnel). That estimate of 15 boards also has what I call the “conceit of optimality,” or inverse-Murphy: it assumes that the crises, new rounds, etc. do not overlap and create impossible time-crunches.

Given that fundraising is THE existential requirement of VC firms, and given that new deal work does have to happen somehow (after all: how did those 15 investments get made??), you’ve got to make significant provision for the working time of a VC to those other, non-board priorities. I personally think that non-board work is at least HALF of the workable hours, but I could be convinced that a board-seat-heavy partner might spend 2/3 of his time on board work.

Therefore, I think that 10 is the maximum realistic board seat capacity of a VC partner who wants to do a reasonably diligent and good job on boards, while also doing the minimum to stay in business as a VC. In practice, I think many boards will take more-than-average time, and I think most VCs will need to spend more time on non-board work, so 7 or 8 is probably a better number to set as a prescriptive maximum.

One could exceed ten board seats without f***ing up in exceptional cases:

  • Independent angel investor (no “firm” overhead)
  • Exceptional geographic and/or industry concentration
  • Evergreen fund, wind-down of a fund, or other nontraditional partner role

Otherwise, you are going to be dropping packets on the floor like a Cogent router in a SQL Slammer epidemic.

One probably needs to hold significantly FEWER than ten (or even fewer than 7) if the following hold:

  • Geographic diversity (have to fly to board meetings)
  • Industry diversity (trying to stay up to date and mine contacts in diverse fields)
  • Series A/B/C rather than later stage weighting (hypergrowth, “chasm,” hiring, and fundraising challenges).

Posted in: vc.
Tagged: ·

VCs passing for “soft” vs. “hard” reasons

Mar 30th, 2010
by rlucas.
No comments yet

I recently made the choice (mistake?) of telling an entrepreneur, whose business I actually liked and respected, the real reason why I was passing on investing at the time.

In this case, there was a new CEO recently signed up to work with a technical founder, there were some family relationships on the team and board, and there were some international complexities (overseas offices). I also believed that there were some cultural issues in the company that needed work (especially around customer service / customer experience issues).

Now, compare these things to the usual, “hard,” “objective” issues that VCs take: market size, defensibility / patents, growth rate, capital requirements — things that can generally be reduced to numbers. My concerns looked pretty “soft” in comparison: seasoning of the team working together, culture of customer satisfaction, family dynamics. I took a risk and laid it out there, adding that I would be happy to check in in a few months to see how things were shaping up on these “soft” issues (but I acknowledged the risk of losing the deal to a faster moving investor).

The entrepreneur’s reaction was mixed. At first he told me he appreciated the candor, but then, in a follow up email, objected pretty strongly and negatively contrasted our communication with other VC “passes” he’d received, each of which had a “hard” reason (like raising too much / too little, outside of geography, etc.). I thought about this for a bit.

If you were pitching, and the VC declined to proceed at that time, would you rather get a “hard” or “soft” reason for a pass?

I’d say “soft.”

If a VC tells you, “ah, you’re raising 10-12 million from two VCs, but my fund size will only let me put in 2-4,” or conversely, “you’re raising 2-3 but I have to put 4-6 to work in each investment,” what have you actually learned? With due respect, you’ve been told that your would-be date has to wash her hair on Friday. Perhaps, in fact, she is going to wash her hair, but if she was really attracted to you, she’d rearrange her shampoo schedule.

Likewise, total market size, IP, or the elusive “traction” are all “hard” reasons for a pass. They’re likewise convenient: they are impersonal / objective, deficient to some extent in all startups, and theoretically required for success. Each is a seed crystal around which a swirl of “soft” reasons can easily and apparently crystallize. And they all sound good, well-reasoned, prudent — things we can easily feel OK about mentioning to our partnerships or to you, the entrepreneur.

(Not that this is disingenuous or untruthful in any way on the VC’s part; since we must reject literally 99% of deals we look at, sometimes one reason is as good as another.)

BUT: if you can find someone willing to take a risk and share the “soft” reasons with you, have a close listen. Soft items include team dynamics, opinions about “direction” or “strategy,” or “pattern recognition” stuff. Sometimes it’s about a “smell factor” or something else that just makes a VC uncomfortable. Always, it’s a complex cocktail of different perceptions, judgments, and opinions (from the discounted cash flows to Lord Keynes’ “animal spirits”), and the true contents are much more varied and harder to describe than a single crystallized hard reason that’s dropped out of solution.

These things are risky for an investor to try and describe. They can be personal or interpersonal, and talking (or listening!) directly about one’s own self is hard. They often include a personal value or judgment call on the investor’s part, and those calls can prove wrong. However, in fundraising as in so much of startup work, perception is (or at the very least strongly feeds back into) reality. Getting an honest assessment of what one investor really, truly thinks at the “soft” and complex level is likely to be more helpful in shaping the business and the pitch than a pat “hard” answer.

Sometimes, things just don’t align and the real answer is: no fit, let’s both shake hands and move on quickly. And sometimes, there’s a complex swirl of doubt but the time and effort of dissecting and parsing it isn’t worth the likely yield: crystallizing on a “hard” rationale for a pass is fine. But if an investor takes the time to dig in, to do the “mass spectrometry” on the trace elements of his doubt, please listen. He’s taking a risk, and though the soft observations may be wrong, the mere fact of their existence and elicitation, as well as their details, should be valuable to the entrepreneur.

(The next step is getting VCs to solicit, appreciate, and iterate/improve based upon “soft” feedback from entrepreneurs. Which I am trying, the reader may have concluded in surmise, myself to do. The entrepreneur I describe is real and gave permission for me to mention him anonymously.)

Posted in: vc.
Tagged: · · ·

The “user” virtual file / workspace in Prolog.

Feb 11th, 2010
by rlucas.
No comments yet

When you’re first learning about Prolog, sometimes you’ll read books or tutorials that show you typing in “clauses,” and then immediately thereafter typing a “query.” If you use a visual or browser-based Prolog implementation, you’ll discover that there are two “modes” (my term), one for the input of the program / database, and one for querying. The query form is denoted by the prompt “?-” as in:

?- my_query_(Variable).

To me, it was somewhat confusing as to why and how I had to keep separate my program from my queries, since I was used to REPL-type interactive programming (e.g. irb for Ruby).

Later, in reading the SWI-Prolog manual, I saw reference to this odd snippet in the “Adding Arithmetic Functions” section:

?- [user].

:- other_stuff(x).
…

It appeared that [user] was changing the mode from query-mode to program-mode, and allowing me to define new predicates.

Well, close. It turns out the way to think about this (can’t seem to find it in the SWI-Prolog manual) is that the square-bracket notation is the “load file” shortcut, and Prolog comes with a virtual file known as “user.” When you query:

?- [user].

and then go on to get:

|:

as your new prompt, you’re loading the “user” file which is like opening a handle on STDIN. (Not precisely, but close enough.) You can then type your program entries, /but you must terminate them with EOF/ (ctrl-D).

This bit of prerequisite knowledge would have saved me a lot of puzzlement and trial-and-error. A shame that Prolog, despite a nearly 40-year history of continuous use and usefulness, has such a high propaedeutic load.

Posted in: Uncategorized.
Tagged: ·

The Solution to the “Carried Interest” Problem

Oct 16th, 2009
by rlucas.
No comments yet

The L.A. Times’ “Money & Co.” has a piece on the carried interest loophole for Private Equity (including V.C.).  Frankly, almost nobody really understands this issue outside the industry and our advisors, but people outside of our industry are going to be reading all kinds of nonsense populist propaganda saying “soak the bastards!” as well as our own industry’s propaganda of “God bless America and profit and mom and innovation and apple pie!”  (Incidentally, it is true that we VCs are different qualitatively from private equity buyout guys — and there are arguments for why we should be treated differently — but everything I’m about to say applies pretty equally to any kind of limited partnership.)  None of the propaganda and hype, however, actually helps us get to the understanding needed to solve this problem in a way that is both equitable and helpful to the Republic.

If you’re not more than merely superficially familiar with this policy issue, let me give you a relatively objective overview of the three elements: LPs, taxation, and liability.

LPs (Partnerships): The LP (limited partnership) structure is a way to recognize formally and legally the age-old practice of having a “silent partner” in your business.  Joe wants to open a factory, but doesn’t have the money; Bob has money but doesn’t know from factories.  Joe and Bob go in, Joe contributes knowledge and work, Bob contributes money.  They agree to split the profit 33/67, even though Joe doesn’t put in actual dollars.  (Win-win: Joe bootstraps up from penury and Bob fattens up without working too much.  It’s been going on at least since the Venetians organized expedetions as “commendas” in the 1300s.)  Now, on the surface, this SOUNDS a lot like the case where Joe starts a corporation and sells 2/3 of it to Bob for the money, but there’s an important difference: taxation.

Taxation: In the corporation (Bob as “shareholder”) model, the profits will get “doubly” taxed at the corporate level first (income tax), then get taxed at the individual level (dividends, or maybe cap gains).  In the LP case (Bob as “silent partner”) model), the profits are NOT taxed at the partnership level — instead, they’re “passed-through” and treated as though each partner did the activity directly (or his share thereof).  You might immediately note that for most all businesses, this would seem to make the LP structure a lot more attractive — so what gives?  What’s the tradeoff?  It’s liability.

Liability: In a corporation, the managers and shareholders are generally NOT liable for the debts of the corporation (except for blatant malfeasance).  (This also breaks down in small companies because banks basically ^!@#$ you over and won’t finance you without personal guarantees.  But the bigger the corp, with more negotiating power, the more true this “limited liability” is.)  In a partnership, in contrast, there must always be at least one “general partner:” a person who controls and is personally liable for the partnership, with unlimited liability.  (The “limited liability” of an LP applies only to the silent, or “limited” partner, who must not exercise control.)  Hence, the essential tradeoff between these structures has to do with whether the controlling manager is personally liable — and frankly, when faced with the possibility of unlimited personal liability for a risky business, paying a “double taxation” rate starts to seem not so bad.

That’s it.  That’s the historical reason for this “loophole,” and frankly it’s pretty understandable when broken down that way.  If you want to take advantage of the legal fiction called a “corporation,” and its made-up, state-conferred advantages including limited liability, you pay more taxes.  If you are willing to associate personal control with personal unlimited liability, you get to dodge them.  You can argue if the tradeoff is right, but it’s a tradeoff.

THE PROBLEM

The problem, today, is that the tradeoff is completely disrespected.  A new corporate form that has caught on since the 1970s, the LLC (Limited Liability Company), allows you to create a legal “person” with the same tax treatment as a partnership, but without the personal liability for any individual.  Hence, any LP whose managers have half a brain today is set up like this:

Acme, LP.  Limited Partner (investor): Rich Dude.  General Partner (manager, liable): Acme Managment, LLC.

Acme Management, LLC.  Owner and Manager: Skilled Guy.

As a result, you still have Rich Dude and Skilled Guy acting out the roles of silent (limited) partner and managing (general) partner, but Skilled Guy has now inserted an LLC “shield” in the middle to protect himself from personal liability. Since that LLC is also a “passthrough” entity, the whole structure is transparent for tax reasons.  As a result, Skilled Guy’s profit distributions (“carried interest”) get the favorable tax treatment, even though he doesn’t have to make the tax vs. liability tradeoff.

So, to me, the answer is simple.  That kind of structure should not be permitted to receive the same tax treatment as one in which the general partner is a “true,” personally liable, general partner.

My proposal for legislation:

  • Carried interest gets passthrough tax treatment for individual general partners IF there is true bona-fide personal liability risk borne for the partnership.
  • Carried interest OTHERWISE can’t be passed-through.  It must be taxed as income either at the intermediate LLC level or the personal level.
  • All existing partnerships have a 3-year window from today in which to elect to recharacterize their intermediate entities to enable true personal liability for passthrough treatment without penalty and with “shall-issue” consent etc. from the IRS and states (but are not required to do so).
  • The IRS will be empowered to seek the “substance” of convoluted structures to prevent tomfoolery.

Frankly, this is probably heresy in the VC world.  Our cross-town neighbors at OVP seem to think that their carry is an “asset … which we contribute cash to own” which amounts to a pretty tortured reading of the flow of dollars into an LP.  The National Venture Capital Association has its own pretzel logic that addresses how wonderful, beneficial, good-looking, and high in anti-oxidants we VCs are, but doesn’t address anything about the fundamental tradeoff itself.

It’s easy to see why our brethren knee-jerk against carry taxation.  For every $1 M in expected value, getting LT cap gains rates instead of top marginal rates means an extra $200k-ish, which is real cheddar even to big-shots.  But that’s fine: if you want to preserve your pass-through prerogative, you should be able to, just like every other general partner of every partnership could prior to the widespread adoption of LLC passthrough-sans-liabiltiy forms: by taking personal liability for the entity’s obligations.

So, to be clear: VC most certainly is a valuable and unique part of our economy; VC is absolutely and necessarily distinct from buyout and hedge funds, and importantly, there is a longstanding historical precedent and clear legal tradeoff justifying differential treatment of carried interest for taxation purposes.  But that tradeoff has now been rendered obsolete, and should be put back into whack — and it’s quite possible to do so in an equitable and rational way.

Posted in: finance.

“Getting It” in IT Security

Oct 16th, 2009
by rlucas.
No comments yet

Look, folks, PKI is hard to grok fully. But if your entire business is being a trust provider (SSL cert vendor), you should try.

GeoTrust makes their Root Certs (the things you download and install in order to tell your computer, “trust things from this authority”) available via an insecure connection:

http://www.geotrust.com/resources/root-certificates/

Unreal.

Posted in: Uncategorized.
Tagged: · ·

Can you trust any VC OVER 40?

Sep 16th, 2009
by rlucas.
No comments yet

Steve Blank at Entrepreneur Corner writes with the inflammatory headline, “Can you trust any VCs under 40?“  He doesn’t actually talk about trust, but instead gives us a gloss on the history of the original Internet IPO bubble (1995-2000) and the subsequent mini-boom in M&As (2003-2008).  His thesis is that any VC under 40 has been negatively influenced by these cycles, and therefore eschews “helping entrepreneurs build companies” in favor of seeking “shortcuts to liquidity.”

Well, I call B.S.  The problem is that Steve starts with a bunch of unobjectionable and demonstrably true statements, then starts layering in misleading or irrelevant stuff, and concludes with what is essentially nonsense.  Observe:

“… Venture Capital firms have honed their skills and strategies to match Wall Streets needs …”

“VC’s make money by selling their share of your company to some other buyer – hopefully at a large multiple over what they originally paid for it.”

“[during the 1995-2000 IPO bubble,] old rules of building companies with sustainable revenue and consistent profitability went out the window.”

“… the number of venture firms soared …”

True. VCs are businessmen.  We respond, like all businessmen, to price signals in the market, and when pricing indicated demand for new IPO issues during the bubble, VCs responded.  More people entered the VC market as a result of seeing these price signals.  That these price signals were amplified by bubble psychology is clear, but hardly novel: the Dutch did it with tulips back in the day, and half the country did it with houses in the last few years.

“The boom in Internet startups would last 4.5 years – until it came crashing down to earth in March 2000.”

“For the next four or five years [2003-2008], technology M&A boomed, growing from 50 buyouts in 2003 to 450 in 2006.”

Misleading.  The boom in Internet company deals stopped in 2000, but those companies (except for the most egregious flameouts) by and large still existed in 2001.  And the M&A “boom” that Steve refers to is a chimera.  VC-backed M&A peaked for that period at $32 billion in 2007, yes — but this was still down from totals of $41 and $69 billion in 1999 and 2000, respectively (that’s M&A alone, independent of the IPO bubble; source: NVCA 2009 Yearbook).

Plus, it is entirely appropriate that a “boom” in tech M&A should follow, with a 5-8 year lag, a boom in VC investment.  All that Steve shows here is that the VC investments that were made during the first Internet bubble, on average, did in fact build companies that later were sold.  In fact, 2004-2006 is probably a pretty appropriate example: with our ~ $14 trillion economy, growing by ~ $420 billion a year (3%, though sadly not this year), it’s entirely reasonable to expect sustainably to generate $10-20 billion a year worth of M&A in the highest-growth sectors.

“… since the bubble, most VC firms haven’t made a profit.”

“… the message of building companies that have predictable revenue and profit models hasn’t percolated through the VC business model.”

“… [you should suspect that VCs are] trained and raised in the bubble and M&A hype and still looking for some shortcut to liquidity.”

Just plain false.  First, Steve confuses VC firms with VC funds.  Most all firms manage several funds.  The #1 correlate of a particular fund’s returns is its vintage year.  When you look at VC as an entire asset class, it’s like looking at performance numbers for mutual funds: most of them (with the same basic focus / strategy) perform pretty similarly based upon how the markets did in a given year.  A given fund having lackluster returns in a lackluster vintage year isn’t broken; it’s how the system works.  VCs’ upstream investors are asset allocators and make steady investments in an asset class year after year, and are richly rewarded for their patience.

With respect to the implication that profitability needs to “percolate” through VCs’ thick skulls, I urge you, dear reader, to talk to any VC-backed CEO.  I double-dog-dare you to come up with an example, outside of perhaps the top 3 or 4 highest profile growth cases (hint: think “tweets” and “pokes”) where his VCs are not harping on cutting burn, boosting margins, and getting to breakeven.  Heap all the abuse you want on VCs, but we’re not stupid — our “business model” is to respond to market demand.  If exit markets want Webvan and eToys, great; if they want six quarters of profit growth, great.  “Eat all you want, we’ll make more.”

I don’t know how Steve puts his pants on in the morning, but I don’t know of any shortcuts.  Until the magical pants elves start helping me with my trousers, I put them on one leg at a time.  And, as soon as the liquidity fairies start pointing to magical shortcuts, I’ll take them, but I sure as hell don’t know where they are.  “Companies are bought, not sold.”  Does a buyer want to buy an unprofitable company?  Great, if the deal is legit and satisfactory to the shareholders — but that’s called an exit, not a shortcut.

Finally, let me address Steve’s ultimate incongruity: the notion that under-40 VCs are “trained and raised in the bubble and M&A hype.”  I’ve already shown that there was little, if any, unsustainable M&A hype in the mid-2000s (though perhaps 2007 got a bit frothy).  So, disregarding that, we’re left with the “raised in the bubble” (1995-2000) argument.  Well, look: there are essentially no long-term jobs in VC for anybody under the age of 25; those few firms who hire IROCs (intellectuals right-out-of-college) generally treat them as “pre-MBA” positions with a guaranteed kick-in-the-ass after 2-3 years.  So what kind of current VC was “raised in the bubble?”  Let’s take a 27-year-old banker/MBA type who was hired in 1996, and so got a solid bubble indoctrination.  How old is he today, as 2009 draws to a close?  That’s right; the VC who was “raised in the bubble” is now 40 years old.

A modest proposal: maybe you can’t trust any VC over age 40.  Better stick to those of us who started our investment careers after 2000…

Posted in: vc.

Some Gotchas with using svndumpfilter

Aug 13th, 2009
by rlucas.
1 comment

A few things:

1. svndumpfilter can take multiple args, e.g.

$ svndumpfilter include /x /y /z > mydump

to include /x, and /y, and /z. It can’t, however, do both include and exclude at once. In theory, you can run multiple dumps when you later load them, so you could (sort of; see below) accomplish the sameish thing with

$ svndumpfilter include /x > mydumpx
$ svndumpfilter include /y > mydumpy
$ svndumpfilter include /z > mydumpz

2. HOWEVER, if you have ever MOVED a file within the repository between (in the example above), /x and /y, you can’t rely upon doing it piecewise. That’s because the references within the loading process during the load of /y will no longer be valid as they point to /x/whatever.

3. It is commonly suggested that one edit “Node-path:” entries within the dump in order to fix up directory structure issues. NOTE that you MUST also change “Node-copyfrom-path:” in the same manner. Trickily, Node-copyfrom-path is only present in nodes that were (surprise!) copied from another node. This is of course tied to 2. above.

—

What is all this about, you ask? Well, it turns out that if you have a single respository with a lot of sprawling projects all under /trunk, you might need to break them out. (For example, if you intend to upload your repository dump to someone like a CVSDude or Beanstalk).

The error message that got me was something like:

svnadmin: File not found: revision 91, path ‘/trunk/x/whatever’

Posted in: Uncategorized.
Tagged: · ·

Forgive me if I start looking too preppy…

Jul 27th, 2009
by rlucas.
No comments yet

…but I think I’m done buying clothing anywhere but Land’s End.

8:41 PM  My mind starts drifting away from the emails I’m trying to return, and I remember that I have a bunch of pants that aren’t quite right.  Bought ‘em a month ago, and been wanting to return them (or at least the ones I haven’t yet worn) to the vendor (Land’s End) to see about getting a slightly different length.

8:42 PM  I compose an email reply to the shipping confirmation email, asking if they can replace or alter all six pairs (even the worn ones).

8:51 PM Desk phone rings (hey, could that be an entrepreneur looking for some equity at this hour?  What a work ethic!).  Turns out it’s LE customer service.  Wants to know if I can wait until next Monday to receive six pairs in a free replacement shipment with an RMA and prepaid box for shipping back all the old ones, including the worn ones.

WTF?!?  LE FTW!

I understand that I could have had this kind of doting if I went to Nordstrom.  But showing up to a department store and breathing the perfume and hearing the piano and seeing the halogen lights is bullshit.  Getting six identical pairs of trousers tweaked 1/2 inch and shipped out ASAP without leaving your office at 8 PM on a Monday is anti-bullshit.

So, I beg you: think not ill of me when you see me wearing the all-Land’s End wardrobe from here on in.  Because it’s officially game over for me and apparel retail.

And, my apologies: I will now, thanks to LE, be all the more insufferable of a consumer when asked to wait on hold, navigate phone menus, etc.  I’ve now been trained: when I have a product problem in the middle of the night, my vendor calls me.  (A competent, polite, anglophone vendor at that.)

[Strongly considering a long SHLD position but LE is basically noise compared to the KMart and Sears juggernauts.]

But seriously now: a few key things they did right.  1. Actually checked the replies to the various “bot” emails that go out at points in the workflow.  Most !@#$@#%^ companies just use a “noreply@” or > /dev/null any emails you send to automated messages.  2. Some combo of skills-based-routing with order-size-queueing (I bet).  My order was probably in the above average range, plus it was a good bet that I was around and available, so queuing up an agent ASAP was a high-value proposition.  3. Empowered agent — clearly he was able to spend a fair amount of money (call it $20 in shipping plus eating another $50 in “trouser expenses”) to get the issue closed.  Big time kudos to IT, Customer Service, and a culture that lets the two work together so well.

Posted in: frivolity.
Tagged: · ·

Newest source of entrepreneurial financing: the dole

Jun 23rd, 2009
by rlucas.
No comments yet

From the VC grapevine comes word of a new innovation in startup funding in Portland (and elsewhere), Oregon: the unemployment department

From http://www.oregon.gov/EMPLOY/UI/ui_special_programs.shtml#Self_Employment_Assistance__SEA_

The Oregon Self Employment Assistance (SEA) Program helps eligible unemployed workers set up a business on a full time basis and still receive full unemployment benefits.  …
To qualify for the SEA program, you must:

  • …
  • have a viable business idea,
  • be willing to work full time in developing the business, and
  • have or be able to obtain the financial backing needed to start and sustain the business until it becomes self-supporting.

Kind of cool.  Normally, I’d understand that there’s a hazard here (given that I am an investor in several Oregon companies that all pay unemployment insurance premiums, which could be raised if this gets exploited).  But unfortunately, I paid enough premiums immorally required on myself (which payments I could never collect, because I was the entrepreneur and would have been ineligible had I quit) during my Oregon years that I feel a bit justified here.

Posted in: tech_and_market_reflections.
Tagged: · · · · ·

One-click Unsubscribe: For ALL Your Emails

Jun 17th, 2009
by rlucas.
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I sign up for (let’s call it) 5-10 new web sites a week. It’s an occupational hazard.

(In fact, there’s an even weirder effect where sometimes there are web sites I know only from Webex demos or slide decks, and not from visiting the site itself. But I digress.)

As a startup, you SHOULD be sending retention and call-to-action emails. It’s a no-brainer. I don’t fault you for it. In fact, if I were an investor or advisor, I’d insist that you do it. (So many Web services naturally get more valuable over time, with the addition of users, data, events, etc., that you are often literally doing your users a favor the first time you harass them to come back.)

And, inevitably, the day comes when I tire of your appeals, and I want to pull the plug (or at least turn up the squelch knob).

BUT: when your “unsubscribe” link prompts me to sign in to your Web site — with a username I don’t remember (not even pre-filled in for me), with a password I even more certainly have forgotten, into your unfamiliar interface — in order to stop those email from coming in, then you are doing wrong.

Your “unsubscribe” link should have enough of a unique auth token in it that I can manage my email preferences. At the very most, it should be a two-or-three-additional-click process to verify with a round-trip email and link combination.

Instead, after two or three times trying to play nice and click your crappy “unsubscribe” link, I will just start clicking “report spam.” Enough of that, and your email throughput will suffer, and with it, all of your retention/CTA messaging.

So please: make it easy to unsubscribe (or at least to manage email prefs). Short-term minimization of your unsubscribe rate is not clever, and will ultimately kill your other metrics (not to mention incur user wrath).

Posted in: tech_and_market_reflections.
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