A view behind the Venture curtain with an wholistic view.
For many entrepreneurs, the venture world is needlessly opaque and confusing. Venture capital is both art and science with karma mixed in. With a synchronistic twist, this blog will try to shed light on the world "behind the curtain" as well as how key entrepreneurial lessons are mirrored in everyday life.
I am out at the annual DFJ CEO Summit. Tim kicked off the event with his eight rules for company success based on 26 years in the business. They are:
Eight rules for success:
1) Test your product and get it out into market...see if the dogs will eat the dog food
2) Don't run out of cash
3) Eliminate human friction...one button on iPod, simplicity, simplicity
4) Focus...what is the most important thing to customer and what you can do to uniquely solve it.
-- and eliminate items on fin statement like WC, anything not critical to key customer need
5) Leadership: you are the meme...you are on a mission but everyone picks up what you eminate...Sun always used the term Awesome (from McNealy), Job's culture. You are the leader of organization: take care of self, employees will also. You are the brand and heart of culture.
6) Think Big...go after things that count, one life to lead and go after big problem, change society
7) Have fun: get the endorphines firing, lots of little stupid things...leads to creative solutions
8) Partner and work with as many people as possible
David Rosenblatt of DoubleClick fame added:
9) Accountability: clear owner of each item who goes to bed focus and worried about it.
10) Transparency: avoid layered bureaucracy and heavy processes that obscure. Keep employees informed of all the company's tentacles, challenges and opportunitities
I'm looking to withdraw a little from my Karma bank here. My son just led his high school team to the Illinois State golf championship. This is big deal for his small school (60 kids per class). It is the first state title in any sport in the school's 60 year history. He also finished second at Regionals and second at Sectionals. He's worked incredibly hard over the past years for this.
The Chicago Tribune has nominated him as one of six athletes to possibly win High School Player of the Month. He is second right now against others from much larger schools who are getting out the vote across their schools. I'm clearly biased but you can decide for yourself who to vote for. I would love to see as many of you as possible go to the Tribune HS Player of the Month site and vote for Nicholas McCall and help send him past the larger schools (plus his is the only State Championship in the group:). Thanks in advance!!!
In 2000-2001, I remember reading negative article after negative article on Amazon. It was burning money quickly, e-tailers were going under left and right and brick & mortar stores were re-asserting themselves. People kept a diligent death watch for it after the demise of Webvans ($1b) and others. In reality, what was going on was a rationalization of the e-commerce space, a pruning of the weak. As scale effects kicked in and they offered new services, suddenly the company swung to profitability and the rest is history. Using Google, I can't even find articles from those days.
I have a similar feeling about Groupon. I have been amazed by the manic swings in public opinion on Groupon that we have seen over the past year. Lately, it has all been gloom and doom. The company goes public at $20/share ($2 above targeted range and trades up 30-50%. First headline I see: "Groupon gets a pop--but not the 1999 kind". Come on guys...enough with the dramatic trash talking.
I'll be the first to admit that I have no crystal ball about the future of Groupon nor an in-depth knowledge of its solvency. However, $700m will certain give them a nice runway to work things out. There are several high level factors that people seem to be ignoring about the company.
1) like all e-commerce spaces, when they rationalize, everyone suffers and, in the end, it is usually the top 2-3 companies that come out dominant. The number of daily deal sites has already dropped from 300 to 180 and continues to fall rapidly. There is scale advantage to being large in everything from online acquisition costs to logistics to call center efficiencies to branding. These grow with time.
2) everyone wrote off Amazon around 2000 and 2001. Eventually, the company fully leveraged its economies of scale, tightened its cost structure, got to break even and then rolled out new products/services. You now have everything from Amazon stores to Amazon private labeling online service & fulfillment for other large retailers to all of its cloud infrastructure (AWS). Groupon will follow a similar path. It will grow, it will get to breakeven and it will innovate. We have not even seen the services yet that will eventually drive profitable growth for the business in the future.
3) why has no one been commenting on the incredible talent in the firm. First, if you give Eric, Brad and Andrew opportunity to iterate, they will figure out solutions. They are quintessential entrepreneurs. $700m buys a good amount of runway for them. Second, they have hired folks like senior data experts from Netflix to figure out preferential targeting and a former Amazon finance exec as CFO. There is a lot of top talent there.
4) does the world expect 10-15 of the largest, most connected venture firms in the world (as well as the two top investment banks) to allow anything to happen to this company? I think it is safe to say that Groupon is well buffered.
So, enough Groupon bashing and enough Groupon hyperbole on the other side. Let this team innovate, grow and take full advantage of the $700m they just raised. I can't guarantee that things won't end in tears here but I can say that they have a lot more going for them than the press/analysts have been willing to admit.