Monday, November 30, 2009

Lunch with Eliot Spitzer

An interesting lunch indeed. The Investorside board (which I sit on) invited Eliot Spitzer to come and speak to the Investorside members a couple of weeks ago to reflect on the Global Research Settlement 5 years later. Given that the membership are independent research providers and Eliot's research settlement channeled money their way for 5 years, this was an interested crowd.

He covered some well trodden ground, like the need for transparency in research recommendations. He revisited his negotiations with Merrill-Lynch when he was investigating their research practices post the bubble bursting (the first time) and said the release of emails was a much bigger issue to M-L than any fine they would have to pay because of their research conflicts. The lack of independence in their sell side research was a huge issue precisely because their investment advisers had such a wide retail reach, and that was why he forced the issue of the release of their emails - and so their public embarrassment.

The walk through history was interesting, but his current views were more controversial, and he seems like a man with a score to settle. Especially his scathing views on Tim Geithner and Ben Bernanke who, in Eliot's view, are an example of the Peter Principle at work - where were they when the recent crisis was being predicted - and now they are supposed to be the solution?

He kept his choicest damnation for executive compensation. In his mind "it is outrageous and speaks to the loss of respect for fiduciary duty. There is no rational way you can justify the $20M plus decisions that compensation committees are making" for CEO pay. "The governing structure has broken down" and "we need to get shareholders back in the game".

Seems like he'll be a proponent of even stronger language than the new "say on pay" compensation regulations that we expect next year.

My observation of Eliot is that he is (as you would expect) whip smart, extraordinarily articulate, opinionated and a consummate politician with strong views on right and wrong in our financial systems - and I agreed with much of what he said. But I suspect his Achilles heel was his arrogance which still peeks out now and then - and he underestimated his enemies of which he had developed many.

Company culture outlasts the company

People write a lot about company culture, but it is an ephemeral thing that is hard to measure and even harder to sustain. But sometimes it happens and it's magic when it does.

I had a Simplex reunion before the holiday and over 60 people showed up to my house, filling the family room and spilling into the garden in the cold weather. Now we sold Simplex in June 2002 - more than 7 years ago - so you'd think the feelings might have faded over time. Even so, the team snapped back together as if only a day had gone by.

Afterwards I received some thank yous that capture what a special time Simplex was:

"Thank you etc... The Simplex clan is uniquely special in how we've followed along in such a warm way after we've gone our separate ways"

and

"It was so lovely to see everyone, and hard to believe that I hadn't seen some of the folks in more than 5 years -- it felt like I just saw them yesterday. It's a testament to the special place Simplex was that so many people came and that the connections were still so fresh. Time and again while I was talking with people, they said, "I've never been at a place like Simplex, before or since..." Thanks for giving us all an opportunity to get together and remember what a gift it was to work together."

Thank you to all of you for making it such a special place and time!

Thursday, November 5, 2009

How to think about your career path

I was asked to speak to a mentoring group at our audit firm - Frank Rimmerman - this morning. It was an early morning group - all women - all accountants but in different roles: auditors, internal accountants and outsource accounting. All under 40, the majority under 35.

Since it was an early morning session, and I only had 45 minutes, I decided to take a casual approach and discuss three basic guiding principles to help the audience structure their thinking about their career path.

After a preamble about the path my career had taken I walked through the following three principles:

1. Think about your career as a pyramid, not a ladder, and so think about the set of skills you need to build up over the first 10-15 years of your career. It's important to have a realistic view of what you are currently good at, but also what the gaps are in your skillset, and then to pick opportunitities either within the firm, or if need be switch firm, in order to fill in the critical gaps.

In my case I shared the time when I wanted to be a CEO but got the candid feedback from a VC that I would never be recruited to run a startup unless I had experience managing a P&L. Hard to hear, but great advice, and at that point I set out to get a GM job so I could learn P&L management.

2. The people you work with and for are far more important than your title or how much money you make. There are 1000+ ways to do something wrong for every 1 way there is to do something right. Working for high quality people, working with high quality people is critical at the early stages of your career (well it's always important but it is especially important when you are on the steepest part of your learning curve). It is 1000 times more efficient to see and learn the right ways early on.

In my case I have a viewpoint that life is short, we spend many hours every day at work, and it is simply not worth the time to work with and for people you don't respect and that you can't learn from. You don't have to like them. You do need to respect them. Pick a high quality firm to work for.

3. You are responsible for your brand, you must take control of your own PR. It is true in life that people think of you what you think of yourself. They see the you you project to them. As a women in particular you need to be very aware of the projection you give - your confidence, your willingness to speak up, your courage in volunteering for hard jobs. Men often understand this early on - society rewards confidence and even brashness in a man, but while social society does not reward that in a woman (remember you are supposed to wait to be asked to the prom), work society gives opportunities to the confident. So - take charge of your own brand.

Think about the funny side of this and you'll realize how true it is. Women often excel at self deprecation - how many times has it happened to you (if you are a woman) that when someone compliments you on what you are wearing you respond with "really, I got it on sale" or "really, you don't think it makes me look fat?". Men just don't respond that way, they just say "thank you".

I enjoyed talking with the Frank Rimmerman team - they have different issues being in an accounting firm, and yet many of the same issues - how to figure out the catalog of skills they need, how to get mentoring, the child-rearing challenge, and how to network. I was glad to be another voice in the discussion and to share some of my life lessons.

Wednesday, November 4, 2009

Named one of the top 10 women in microelectronics

I was honored today to be named one of the top 10 women in microelectronics by EE Times - you can see the article here.

It's very nice to be recognized, but the fact that I am being recognized 6 years since I left the industry is also indicative of the sad state of affairs - just how few women make it to the top in that field. The other women in the list are almost all women I know well - there were so few of us how could we not get to know one another?

I am on the Anita Borg Institute board - and this is the reason. There are simply not enough girls in the U.S. staying in math and physics in high school, and not enough girls in the U.S. studying engineering in college and as a result we have too few coming up the technical ranks. It's a huge exposure for us as a country to be tolerating an education system and media bias which discourages 50% of our population from participating in the critical technology areas that will lead the world in the future. Nuff said - I'll step back down off my soap box now.

Monday, November 2, 2009

Ad dollars moving into social media in 2010

Guest post: Michael Prospero Director of Research at FirstRain

In 2005, I was one of the analysts covering digital media and online advertising for an investment bank. At the time, most of the analysis was around the way people spent their time with media and the trend of eyeballs and dollars moving online. The number of people consuming their news from the internet was growing and the number consuming news via television and radio, not to mention newspapers, was falling fast. Everything on demand all the time along with the lack of commercial interruption are two of the major reasons for this behavioral change. As people spent less time watching television in the traditional manner (i.e., not using a DVR where they can skip commercials) they spent more time online. This trend continues today as people are watching movies on their computers that they download directly from Netflix or the watch TV shows online with sites like Hulu.

Gradually, advertisers began to follow the users online where they could accurately measure the success or failure of their advertisement using technology e.g., click tracking. The trend continues today and with the exception of certain sporting events (Monday Night Football or the Olympics), it is considered a much less efficient means of spending advertising dollars especially for certain demographics. However, this trend of ad dollars moving online was fairly slow compared to an emerging sub-trend. Social Media/Networking sites have surpassed email in terms of time spent online.

“Nielsen Company reports that the time spent on social networks and blogs accounted for 17% of the total time spent on the Internet in August 2009.” The interesting fact about this trend is how fast it has happened. In just one year, the time spent on social networking has tripled.

Just as it happened with ad dollars moving online following customer eyeballs, you will see ad dollars moving into the social media space at a rapid rate in the next year. It’s no surprise that the sites that stand to benefit the most today will be Facebook, MySpace and Twitter. In fact, eMarketer projects that social network ad spending US marketers will increase their spending 13.2% in 2010, to $1.3 billion. If most of this new ad money is spent on the handful of the most popular online social destinations, I expect a number of new competitors to emerge in this fast growing space in short order.

Sunday, November 1, 2009

The pros and cons of going public vs. selling your company

I taught two classes at the Haas School of Business at Berkeley this week and the focus was on "Exits". One small class, one large, both were sets of students studying how to become entrepreneurs and start and run their own ventures.

Fortunately, having bought several companies, taken a company public, and sold my last company this was a subject I didn't have to do a lot of preparation for so I took a few minutes to tell my story (so far....) so they had the context on me and then I took questions.

Interestingly enough, the focus of the professor was on IPO vs. selling as exits, but I explained an IPO is not an exit for you as the CEO, only for your private company investors, because when you are CEO of a public company your mindset needs to be that you are in it for the long haul, for years, and exit is the last thing on your mind. It's call "Initial" for a reason, it's the beginning.

Here are the key points from the classes:

IPO (Initial Public Offering)

Pros:
- access to the capital markets (really the only good reason to do it)- if you need significant capital to grow this is usually a much more efficient (less dilutive) way to raise money than through the private markets like VCs
- cash in the bank to weather ups and downs
- liquidity for your investors - usually 180 days after the IPO when the lock up comes off
- liquidity for your employees - ditto
- better transparency and often higher confidence for your customers
- currency (your stock) with which to buy other companies and to build your business faster than you can organically
- you can build a new board of long term advisors instead of VCs, although some of the best VCs stay on the boards of their companies for the long haul (like Tench Coxe at nvidia and Bruce Dunlevie at Rambus)

Cons:
- you don't get liquidity yourself - as the CEO it's "bad form" to sell your stock any time soon after an IPO, some would say ever while you are CEO, because if you believe enough in your company to persuade other people to buy your stock, why would you be selling? (the only exceptions to this are for tax selling). Note I never sold a share of Simplex before it was bought by Cadence.
- transparency - there is no where, no way to ethically hide a bad quarter if you are public
- cost - estimated to be $5M a year in additional cost now post Sarbox
- time - you'll spend at least 1 week of every 12 talking to investors and preparing for your earnings call
- you have to spend a lot of time with investment bankers and lawyers
- you won't sleep much for 90 days

Selling your company

Pros:
- a way to accelerate your strategy if you chose the buyer wisely - you should get more investment and a better (larger) channel for your products - larger companies can scale a good fit very quickly as we saw with Cadence and the Simplex products and as Cisco demonstrated so well in the 1990s
- liquidity for you, your investors, your employees
- a way to declare victory
- a way out if you are reaching your limit - either your skill or your energy level without the risk of hiring a new CEO
- you are longer in the lonely position at the top - the one where the buck stops
- you don't have to deal with a board any more

Cons:
- absolute loss of control of your strategy and the investment in your strategy - make no mistake once you are sold, no matter what the buyer tells you on the way in, you are no longer calling the shots for your people and your products
- some of your employees will be let go - often finance and sales are let go because they are overlapping, maybe even R&D for overlapping products - this is heartbreaking because you've built the company together
- being bought is not a fun process, it's grueling
- you have to spend a lot of time with investment bankers (if you need them on the deal) and lawyers

Bottom line you shouldn't plan for your exit. The way to win is to set your sights on building a great, high growth company for the long term and make decisions to that end. Never make decisions because you are going to sell because you just don't know when the opportunity will come along and you'll make a weaker company as a result. Don't obsess on your percentage (as I have seen entrepreneurs do) - obsess on the size of company you are going to build and what it can be worth one day and have confidence that you'll do OK.

And when the opportunity to go public, or to sell your company, comes along think long and hard about the loss of control of your destiny, either way, and be sure you want it before you do it.

p.s. I LOVE that United now has Wifi in the air. I can be productive the whole way from SFO to NY.

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