Monday, July 25, 2011

Today's tech bubble: Sell or IPO your company?

If you had the chance to sell your tech company for a great price would you - or would you play the long game?

This is a decision successful entrepreneurs end up facing and is a question for some tech entrepreneurs right now as we go through what is arguably another bubble - and there are some very interesting cases to think about - and think what would you have done?

Consider the Huffington Post: A success story to most people - purchased by AOL for $315M in February at a 6.3X multiple of $50M in revenue and very small profits. The last investor, Oak Investment Partners, tripled their money in just over 2 years which is a great result for a late stage investment decision. And yet, as Jeff Bercovici of Forbes writes in his somewhat damning review of the HuffPo/AOL honeymoon, the difference in interests that can appear between investor and entrepreneur in very visible in this case.

Fred Harman, the Oak partner who made the HuffPo investment, told Forbes "Our goal was an IPO rather than building up the company to be acquired by another media company" and that he and the HuffPo CEO Eric Hippeau "were still inclined to roll forward as an independent company out of the belief that The Huffington Post could continue to rapidly scale and be the dominant social news company on the Web". But for Arianna, AOL meant personal liquidity and a much larger stage and budget to build her dream with.

(full disclosure: my current company FirstRain is funded by Oak. They like to swing for the fences - as do I)

In contrast look at Zillow, which went public last week and, on 2010 revenue of $30.5M, now commands a valuation of greater than $1B. Is this valuation a surefire sign of a tech bubble? On Seeking Alpha writes that "The vast difference in valuation between a recent tech IPO and similar publicly traded competitors is not limited to Zillow" - Pandora's valuation is almost as shocking as Zillow's and outrageous in comparison to their comp RealNetworks. So long term public valuation (and so the team's return) is at risk here.

In the enterprise social media space, Radian6 decided to sell to Salesforce instead of taking the long road. At a valuation of $326M and 10X revenue Techcrunch thinks SFDC overpaid but 10X trailing revenue is a terrific valuation for an enterprise software company and being integrated into Salesforce takes all the return risk out for the founders - plus SFDC smartly put additional options on as an earnout over 2 years (not unusual when a public company buys a private company and wants to keep the founders around). But also consider that maybe Salesforce creates a larger platform with deeper pockets for the Radian6 team to execute their vision on.

And waiting in the wings we have Groupon. They did not sell to Google last Fall for $6B and, if they can get over the questions about their business model and profitability, hope to IPO for $20B - and are lining up enough banks to make it happen.

All this leads to questions of timing - are today's valuations fashion driven because tech IPOs are hot now? - and what would you do if it was you? I've been there, it's a gut-wrenching decision.

If you sell:
+ You get secured liquidity and wealth for you and your team (especially if you are bought for cash)
+ You play on a larger stage, often with a larger budget
+ You may get access to many more customers on a larger platform
+ You create long term job security for your core tech team
- You lose final authority on strategy and budget
- Many members of your team (non tech) may lose their jobs
- You lose the essential joy of building your own venture

If you go public:
+ You get significant capital to grow your business with
+ You stay in charge (for now...)
+ Your investors get a great return in 6 months (after the lockup comes off)
+ You may get a significantly higher return over a longer time period
+ You continue to drive the strategy and M&A to execute you and your team's vision
- Limited liquidity for you or your team for the foreseeable future
- You are running a public company (no picnic!)
- Your return is not secure, you are subject to volatile markets

... and there are many more pros and cons...

One of the best pieces of advice I got was to, in the end, focus on how my management team is successful and makes money from their hard work. Not my ego or my net worth. Not my investor's return. My team, the ones who built the company with me. If they make money, everyone else will make enough.

Thursday, July 14, 2011

CEO and culture - Rupert Murdoch and today's living examples

I am in England for a few days this week and, splashed all over the headlines, we have a great example of company culture and how it is set from the top. The hacking scandal at News Corp is Rupert Murdoch's nightmare and a classic case of unethical behavior having been tolerated by him and his senior team for a long time.

The News Corp anti-establishment (anti-journalism) culture, while it led to huge circulation, revenue and the accumulation of wealth and power for the Murdochs, is going to send some people to jail, profoundly damage their reputation and has already caused the death of News of the World ... and I venture is going to spill over to the reputation of that veritable institution the Wall Street Journal. As David Ignatious says in an excellent piece in the Washington Post on the cultural aspects of what is happening "News Corp.’s [I think he means Rupert Murdoch's] identification with the common man seems to have bred an arrogance and contempt for traditional rules." -- and this one is too cute to miss...

The CEO sets the culture of a company - good or bad. His or her behavior, what they do and what they tolerate, more than what they say, sets the behavior and expectations of the organization. As CEO your employees watch every move you make, every expression, and if you cherish building a great culture you need to pay attention to the details.

Reed Hastings of Netflix is a great example on the positive side. He's a warm, smart, very principled person and the Netflix culture reflects that. Tony Hsieh, CEO at Zappos, did a wonderful job of building a customer-centric and humorous culture, and used social media extensively to promote it. In contrast Mark Hurd was not a culture fit for HP and when he fell from grace for false expenses and inappropriate behavior the culture and the board rejected him - although right into the arms of a company that better fits his culture - Oracle - long known as a tough (but very successful) culture.

The little things count and today how you present yourself to the world on social media plays a key role in your culture with your customers and marketplace. I was interviewed this week for an article on CEO blogs (whether to, the risks, the reasons to, how to find the time) and I told the interviewer that my one worry is stepping over the line and offending someone. This is a challenge because if you are perfect then you are boring. I strive for authenticity, opinion and some humor mixed in.

Take Tuesday's example of the fine line -- the InsideView CEO photoshopped into this photo by employees and then tweeted out by @insideview. Funny? or tolerating a culture promoting the objectification of women? One of my customers (a male) was appalled, one of my employees just thought it must be an East Coast company (it is not). (post ed. - I offended this CEO who felt I was stereotyping his Italian descent - which I had not considered - and making judgements of his company's culture - which I was not intending to. My goal was to use the example only to call the question of the fine line. I apologize.)

Culture is set from the top, good culture shines from the leader; fish rot from the head. Social media is here to stay and we face an exciting challenge as CEOs and marketing people to harness it's power in a positive way to build our cultures and make those cultures visible to our customers. And to carefully learn from the horrible example we see playing out in the uk press today.

Monday, July 11, 2011

Feeling like a proud Papa today

One of the most rewarding aspects of being a CEO is when you can see the hard work put in by your amazing team really paying off.

For the last several weeks and months, everyone here at FirstRain has been putting in long hours in order to launch the next phase of our solution to market, and so I am thrilled to announce the release of the third generation of the FirstRain and our new FirstRain mobile apps for iPhone and Android (now available in the iTunes App Store and the Android Marketplace) today.

This is the third (and huge) step forward in FirstRain's development, and provides our customers a truly unique and effective, role-based way of monitoring the critical developments impacting their business, industry, customers or competitors. Plus we've also now optimized FirstRain for use on tablet devices (loving it on my iPad), all of which means your critical intelligence can now be delivered to any place or time you most need to see it: whether it's over your morning coffee, at your desk, on your company portal or out on the road.

The product also has also has a significant look and feel make-over, with a fresh-new look and a streamlined design making it simple to get in, find what you need, and get on with your work.

All in all, we think it's a big step forward in an already great product, and seeing this really sharp new iteration of FirstRain come to life has been extremely gratifying for me and everyone involved. And for all of you readers who are FirstRain customers, try out the new role-based monitor setup, download the new mobile apps, and please, let us know what you think!

FirstRain's new mobile app available today for our customers

(you need a login but if you want to try it out contact me)

Friday, July 8, 2011

My team completes the Splash and Dash!

Perfect, beautiful Cupertino evening last night. A few of us competed in the July Splash and Dash in the Stevens Creek Reservoir - a 1 mile swim and 3 mile run which is just the right distance to make you feel great! Aaron and Cory did both the swim and the run, Thomas ran in relay to my swim, and Doug completed the swim and decided he'd wait until next time to do the run....

I am a big believer that competing in sporting events is a great way to build teams and it's something we do well together at FirstRain, especially within the sales team. We started with everyone participating in some way at the Aquabike in 2008 and now we not only compete in a couple of events a year together, we also train together, and eat and drink together!

Because the reservoir is only a couple of miles from my house we joined up with supporters, spouses and several kids at my house for a bar-be-que. The kids -- and one of our dogs -- spent the whole time in the pool and I gather everyone under age 10 slept like a log last night!

Tuesday, July 5, 2011

Go ahead and ask the "girl questions"

So often women long to ask the “girl questions” – the ones tied to their roles as mothers and household managers – and yet fear asking them in a male dominated workplace.

Every time I talk with groups of women about anything I am swamped with questions about child care, sharing house work and what my husband and/or kids think about me working and being a CEO. It’s as if there is a pent up demand for answers or guideposts along the road and yet, in reality, there are none.

Yesterday’s excellent New Yorker piece on Facebook’s Sheryl Sandberg gives an example of how tough the question of whether to even ask the questions is – even women judge other women for asking:

“Earlier, Sandberg had described a talk that she gave at the Harvard Business School, after which all the women asked personal questions, such as how to find a mentor, and the men asked business questions, like how Facebook would deal with Google’s growing share of the cell-phone market. Telling this story, Sandberg was critical of what she considered to be “girl questions.” Now Priti Youssef Choksi, Facebook’s director of business development, asked whether it was “a girl question” to pose concerns about, say, maternity leave.

Sandberg and the female executives in the room said that they thought it risked being a “girl question” if it was asked in a “whiny” way. Choksi pressed the point, describing a female employee who had recently talked to her about taking a short maternity leave because she feared that she would lose her job if she stayed out longer. When Sandberg came to the company, she changed the policies to allow men and women four months, but this employee wanted to take only one. “As much a girl question as that might be,” Choksi said, “the logistics of being away for X amount of time is something women are afraid of, and I’d rather tackle it head on.

“I agree,” Sandberg said, retreating from the much sterner position she had taken moments ago.”

For many executives, male and female, if you ask too many "girl questions" you risk them labeling you as too concerned about “women’s issues”, but as an employee if you don’t ask you risk missing understanding and context for your choices at the company you work for which can be an important part of determining what strategy to take so go ahead and ask. The important thing is to be matter-of-fact about it – never whiny, never paranoid – just pragmatic. My choice on child #2 was to take him into the office at 4 weeks old for a week because the company needed me in - and after the first shock no one minded (you can read some of my funny experiences along the way here).

Two weeks ago I was interviewing a young female candidate – mid thirties with 4 year old twins. After an hour of highly professional discussion she then asked me about our health insurance… and before I could even answer her question she was apologizing for asking, repeatedly! She was hyper sensitive about being perceived as weaker than a male candidate or needy. She even told me she does not think her managers know she has children and she wanted it that way.

This level of concern and awareness of being a woman in a male workplace backfires. I don’t believe you want the issue to be a lightening rod, instead make is a simple part of who you are as an employee. “I have a family – tell me about your health benefits”. Note – the only case at FirstRain so far where we have had an employee out for an undue period of time because of a birth was a young dad out because his baby was an extreme preemie. You can bet he was as focused on his family as any new mother would be!

My advice to women coming up and dealing with the challenges of raising a family at the same time as building a career is to be open and authentic about it. Never whine, never see yourself as a victim. See yourself instead as a valuable, skilled employee that your company needs and wants and then other people will see you as you see yourself. And if your company penalizes you find a better company to work for. Seriously.

And in the right setting, with other women facing the same issues you are, share the ideas that can help you navigate the very real challenges of a having little children and a strong career at the same time.

Monday, July 4, 2011

TechCrunch, Digiday and the age old dilemma of the free press

Does it ever pay to confront the press - or does the press have the ultimate bully pulpit?

Vanessa Campones of DIGIDAY has openly taken on TechCrunch in her recent post Entrepreneurs Should Say No to Silicon Valley's Bully. Her argument goes that Michael Arrington is not going to honor journalistic principles and has been known to sink to revenge postings with unsubstantiated rumor to hurt companies that don't give TechCrunch first dibs on a story. Hence she advises her clients to steer clear of Mike and focus on the higher quality digital publications that focus on tech.

My experience is that any dealings with the press need to be handled with great care. The press is NEVER safe or your friend, no matter how friendly they may appear to be, or how much they "respect" you.

I got burned many years ago befriending a young journalist who was new to the industry, spending many hours educating him only to have him write a nasty gossip piece about me a few years later when it served his interests. I learned the hard way that the journalist's job is to be read and to drive circulation with hopefully some sources to substantiate their story - but not always. But Arrington being so overt in his threats to, and aggression towards, entrepreneurs is certainly unusual - the threats are usually unspoken.

I don't think Vanessa's advice to stay away from TechCrunch is good advice for young tech companies though. TechCrunch has the readership, and if you believe your company benefits from being covered by TechCrunch (or any other specific pub that speaks to your audience) then you need to figure out the strategy to get the coverage you want. The best question to ask yourself is do you need TechCrunch? Does it do anything for your business model? If yes, work with them, if not don't worry about it.

Today everyone is a "journalist" (note Arrington is not a trained journalist - his education is as a lawyer). Individuals break news, write commentary, post photos and live out loud. In the grey zone between the few remaining classic properties (WSJ, NYT, Fortune etc) and the millions on Twitter/Facebook there is a whole new class of property using technology to break news fast and light, rather than based on journalistic research. Our job as companies wanting to get our story out to our potential customers is to be smart in how we talk with new media. And unless you have Michael Westen's skill at fighting back when you are burned this means treat them all equally, with a light hand, and save embargoes for the old school publications that know what an embargo means.

Saturday, July 2, 2011

A day of sun, wind, sand and water

The North Shore of Maui is the perfect place to spend a day in the wind and sun. Armed with a cooler, a great book, #50 sunscreen and my camera I watched my two man-children kite board all afternoon. Silly grins and laid back attitudes, they chatted with their kiting buddies and checked in on me every 30 minutes or so with a "did you see me jump?" or "did you get a photo of me?" types of inquiries - all about them and their kiting of course!

But I got my end in - note the blue nose - although I did allow him to put on blue instead of the pink which I was teasing him with!

Prepping their kites and boards

Dad helping his boy launch

Sebastian headed out into the wind at high speed

Dad jumping to assert his skills in front of his son
(although my camera work does not do his jumping justice)

Yeah Mom - I give in - you can put zinc oxide on my nose if you'll just let me kite!

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