Entrepreneurial Leadership and Management . . . and Other Stuff


Board Meetings – A CEO’s Point of View

I have read several posts on board meetings lately, including a couple of insightful ones by Scott Converse, CEO of Clickcaster, discussing his first two board meetings (you can find them here and here).  Brad Feld also has a great series on board meetings which you can find here.  Having chaired, as I count ’em up now, well over 100 board meetings as a CEO of both private and public companies in the last 15 years, I thought I’d throw some additional thoughts into the mix.  Here are my top 10 (er . . . 11).

  1. Talk with each board member prior to the meeting.  Votes don’t happen at board meetings; they are just formalized there.  That’s why they are almost always unanimous.  Anything even remotely controversial or detailed should be discussed prior to the board meeting.  That’s not to say it won’t be discussed again at the meeting, but because you’ve engaged each board member on the topic ahead of time, you will have had the chance to answer any specific questions and help them prepare for a group discussion.  This saves a load of potentially wasted time once the group gets together.  Even if you don’t have any challenging topics for the board meeting, it’s a good idea to check in with each director to see if they have topics they feel are important to cover at the meeting.
  2. Have face-to-face meetings.  There is a strong desire among certain board members to have telephonic meetings.  In my experience, these just don’t work as well.  While I’m sure there are people who can stay engaged while on the phone, for most people there are just too many distractions when they are sitting at their desk (or lounging by the pool of their opulent VC estate).  You also miss the body language and facial expressions of your board members which can offer as much advice and feedback as anything they have to say.
  3. Send board material to the board at least 24 hours in advance.  Even better if you get into their hands 48 hours in advance.  Your board members are busy people and, likely, travel frequently.  Don’t expect them to spend any real time on the material if you send it to them the night before the meeting.
  4. Run the meeting like you run your company.  Board meetings aren’t free-form, non-directed discussions.  Keep to the schedule and don’t let discussions go on a second longer than they need to.  You may be compelled to abdicate your role in the meeting to your investors.  Don’t.  They want a well run meeting too.  Keep in mind that it’s your meeting.
  5. Put the summary up front.  Summarize your update to the board and goals of the meeting in the board materials sent out prior to the meeting AND AGAIN when you open the meeting up.  Everyone should be clear on and agree to what the goals are for the meeting.  Ask the board if they want to add anything to the agenda during your pre-meeting discussion (see #1) and again at the start of the board meeting, after they’ve had a chance to review the board materials.
  6. Have “closed” sessions at the beginning and end.  The session at the beginning includes both inside and outside board members (no management) and is to dispatch the perfunctory board actions like approval of minutes, option grants, FMV and so forth.  Getting these out of the way up front is important because someone may end up having to leave early, causing you to lose your quorum.  The session at the end is for outside board members only.  It’s a good idea to schedule this session to give your outside board members dedicated time to talk about you.  What?  You thought that maybe they only talked about you while you were with them?
  7. Have your management team attend the meetings.  Your board isn’t just an advisor for you.  Your whole team can benefit from the advice they give and can learn a lot from the discussions that take place at the meeting.  More importantly, each member of your team should feel like they are individually accountable to the board.  As such, when group-level presentations are in order, have the appropriate member of your team do the presentation and lead the discussion.
  8. Repeat the summary of the company’s goals, strategy and tactics at the beginning of each meeting.  Your board members should know these, of course, but I’ve found that it’s a good idea to remind them.  It helps to stir their creative juices and to get everyone aligned right at the start of each meeting.  Doing this will also help them remember what the company is up to when they’re not at the meeting and to use the concise version you use for their own elevator pitch.
  9. Don’t assume that your board members remember the detailed facts you presented at the last meeting.  This goes for numbers, especially.  Chances are, your board members are on many other boards as well.  There are numbers, facts and tidbits blasted at them all the time.  Format your materials so that all the important quarterly and annual pertinent information as well as any key metrics used to measure the company are easily found and referenceable.  Make the board aware of these again during any presentations or discussions during the meeting itself.
  10. Your board knows how to read financial statements.  The detailed financial statements should be in the package you deliver to the board prior to the meeting.  If you go over the detailed numbers at all during the meeting, create one summary slide/page with all the key items on it for review.
  11. Stand up.  Board meetings are way more casual than they were 20 years ago.  Still, when you stay seated while presenting to the board (or any audience, for that matter) you send a signal that the topic is not worthy of your full energy.  As in #4, above, it’s your meeting to run.  It’s your presentation full of your ideas and demonstrating your hard work.  Show it.  Keep your butt in the chair for general discussions, but stand up and take control of the meeting when you present.  It shows respect for the material and for the people you’re presenting to.


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 November 29th, 2006  
 Boards, Startups  

Patriots Beat Da Bears

While you can’t say that any game that has 9 turnovers was a good one, yesterday’s matchup between the 7-3 Patriots and 9-1 Bears was at least a big one – for the Pats, at least.  The Bears, with their outstanding 9-1 record (prior to yesterday’s game) are virtually assured a playoff birth.  The Pats . . . well . . . let’s just say that even die hard Patriots fans were not completely certain.

Prior to this game, the unspoken concern among Patriots fans was if their favorite team was playoff worthy.  Sure, they had a winning 7 and 3 record.  Sure they were two games ahead of any other team in the AFC East.  Sure they have the best clutch quarterback in the game.  But their record against teams with winning records is surprisingly poor.  Today’s big win, while not pretty (5 turnovers by the Pats), shows that they can hold their heads high going into the playoffs.  Winning playoff games is another story . . .


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 November 27th, 2006  
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Praying for a Hockey Stick

It’s about halfway through the 4th quarter for the companies I work with (all have fiscal year = calendar year).  About this time during each quarter I reach a point that I think of as the hockey stick turning point, the point at which I move from being confident that there will be no bookings or revenue hockey stick during the current period to praying that there will be one.  After all, if you haven’t already made a reasonable percentage of bookings or revenue by now, you gotta make it up in the back end, right?

A hockey stick (most often referred to as a fu*&%$ing hockey stick) is the shape of the curve representing the disproportional percentage of revenue and/or bookings coming in late in any fiscal period.  It’s bad because it’s difficult to plan around, can cause cash flow nightmares, brings about a huge amount of uncertainty and pulls the organization in more ways than it’s often able to deal with in order to close so much business in such a short period of time.

Hockey stick bookings or revenue issues happen for a variety reasons.  Some of them are . . .

  1. The sales force drains it’s pipeline in order to meet the previous quarter’s financial goals, making it rebuild it’s pipeline during the early part of the following quarter and close those deals during the later weeks.
  2. There are subtle and, most often, unintentional rewards built into the sales plan that encourage sales people to close deals late.
  3. Customers wait for a new, late-quarter, product release because they have no incentive to buy earlier.
  4. Customers wait to pay for renewals, upgrades, service, maintenance, etc. until the last possible day they can.
  5. Customers wait until late in the quarter to try to squeeze the supplier for bigger discounts.

These problems, sometimes several of them working together insidiously, often result in hockey sticks rearing their ugly heads in every quarter, with the fourth quarter frequently being the worst because it is, generally, the largest quarter, financially speaking.  If you then draw a trend line through all the quarters, you see that the year’s bookings/revenues are a hockey stick as well.

I spent most of my career in an industry with a relatively small number of very large customers.  Generally speaking, these large companies had well-trained purchasing departments that knew how to manipulate the sales process of their suppliers.  As a result, I dealt with my largest customers pushing deal closings to the last possible minute of every quarter.  As such, I struggled with hockey sticks all the time. 

While I never was able to completely slay the beast, I was able to make some changes that worked – at least incrementally.  If your target market is small, big changes are tough, but some of these suggestions may help you out.

  1. Look at your sales compensation plan.  Yes, I know you’ve done it before, but do it again.  In my experience, almost all sales plans unintentionally encourage some behavior that isn’t aligned with the company’s tactics or strategy.  Sometimes implicit rewards in the plan (not always financial – sometimes they just allow one salesperson to brag that they’re better than another) make it desirable for an individual sales person to delay sales or consolidate them late in the quarter.  Add rewards to your plan for bringing in sales as early as possible in the period.
  2. Change your fiscal year (or set it wisely at the start).  I had the opportunity to do this once and jumped on it.  It made a tremendous difference.  In my case, I moved it to February – keeping it away from the holidays and summer months when you may not have a full-staff available to deal with the added pressure.  It effectively (although not completely) dealt with the problems of the large purchasing departments manipulating our quarters while helping us balance out cyclical buying cycles.
  3. Never pre-announce the delivery of a product that keeps the customer from buying today (like Microsoft shipping Vista in January, missing the holiday season AND killing XP sales).  At the very least, reward customers with a free upgrade to the new version if they buy the current product now.
  4. While the common wisdom is that recurring revenue models (as opposed to perpetual models) take care of the problem, this is only true with slow-growth companies.  If you’re building on a small base of sales and you’re growing fast, you still have to bring many new customers in.  Closing those customers late in the financial period, no matter what your model is, will cause a hockey stick problem.  Of course, recurring revenue does a great job at flattening things out once your numbers get big and growth is slower.
  5. Don’t live hand-to-mouth.  If you’re sucking your pipeline dry all the time, you’ll be praying for a hockey stick all the time.  A big pipeline with many prospects in play will give you the most flexibility and the greatest likelihood of reasonably being able to control the shape of you revenue/bookings curve.
  6. Have a nice mixture of small and large deals.  If your sales force is encouraged to only be going after the biggest customers or biggest sales, it’s going to be difficult to predict when they will close or for how much.  This increases the likelihood of a hockey stick.  If they can close some smaller deals while nurturing the bigger ones, the business will be more healthy.

When you’re tight on cash, are goal-driven or have to report your results (like a public company), hockey sticks can ruin your day (er . . . quarter).  Life is just better when bookings and revenue come in at a pretty consistent rate throughout the fiscal period.  The business is easier to manage, the future is easier to plan and you can decrease your Maalox budget substantially.


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 November 26th, 2006  
 General Business  

Getting Lost in the Desert

My family and I trekked out to Scottsdale, Arizona to see my father over Thanksgiving.  We’ve been out there many times and I’ve always wanted to ride (cycle) out there.  So this year, I borrowed a bike case (thanks, Chris!), took my bike apart and loaded it up with all our other crap for a short trip to the desert.

On the first day, I did a round trip to Carefree, AZ on a crowded road with loads of construction.  Of course, everything seems to be under construction there as the Valley of the Sun is expanding faster than the universe.  The MotionBased entry for the 27 mile ride is here.

I did a much more interesting, 47 mile ride on Friday.  It wasn’t supposed to be that long, but I got lost in the desert.  The picture above is at a point where I was thinking that Scottsdale was well on the other side of the mountains in the background and I really didn’t know how to get back without backtracking, which I refuse to do out of principle.  To add to my concern, I was only about 10 miles into the ride and I had already given up almost 1500 feet of elevation, with more to go.  I just hate when I leave all the work to the end of the ride, I’d much rather do all the climbing when I’m fresh.  As can be seen from the elevation chart below, it didn’t work out that way.  You can check out that ride here.

In the end, the climbing out there isn’t bad at all.  There are few steep climbs (you can find ’em if you want ’em, though), but the desert floor is not as flat as you might think.  You find yourself moving slower than you expect to and in a lower gear than seems right, until you realize that you’ve been climbing for 10 miles.

I’m going to travel with my bike more often.  I really got to see much more of the place than I ever had before and TSA and the airline were much better about the whole thing than I had expected.

BTW, if you haven’t checked out MotionBased before, it’s a pretty cool site (I’m not affiliated, just a user).  You upload the data from your GPS unit and MotionBased analyzes it and stores it.  You can have private and public data.  The two rides mentioned here are public, obviously.  I did a search through the public rides of others to get some potential ride routes before heading out to Arizona.  It’s a cool way to get introduced to an area before you arrive.


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 November 26th, 2006  
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Vista RTM – Driver Workarounds

As a beta tester of Vista, I’ve been hip-deep in the new operating system since it’s early releases.  It’s been an interesting experience, but I can’t say that it’s been fun.  Because of a crash of the RAID array on my previous XP installation, I decided to go with Vista as my one and only working environment on my primary desktop.  That left me no fallback in dealing with the huge number of application incompatibility issues and various states of OS instability.  Yeah, it was probably a stupid decision, but it seemed like the manly thing to do at the time.

Now that some of the versions have RTM’d for release with new systems, I’ve had the opportunity to play with a more stable and significantly faster version of the OS.  It remains visually beautiful with some really cool new features and loads of new levels of protection.  It’s gonna take the world a little while to catch up, though.  Because of new security, any application that expected to have kernel access or accessed the file system in anything but the cleanest way will have problems running under Vista.  This applies to a lot of applications, even some basic ones.

Device drivers are the biggest problem area.  Microsoft claims that there are something like 19,000 drivers on the installation disk.  But during my install of the RTM version, Vista couldn’t find drivers for my color printer nor either of my two scanners.  If you have similar problems, I found a workaround to this particular problem that might help you out.  It worked for two of my three failing devices.

Here’s the process:

  1. Download the latest version of the XP version of the driver for your hardware.  Usually available in the downloads section of your hardware vendor’s web site.
  2. Run the installer application from your disk using the “Run as Administrator” command.  This can be found by right-clicking the executable file for the installer and clicking on the command in the context menu (you will need administrative privileges on your user account to do this, I believe)
  3. This should install your driver, but may just unpack (uncompress) the files for your driver.  Watch the install process and remember where the files were installed.
  4. If the installer just uncompressed the files, go to the directory where they were unpacked to (often a subdirectory located in the root directory of the C: drive) and run the actual installer with “Run as Administrator”
  5. After you have done all this, turn on your hardware.  Vista should tell you that it’s trying to install the driver and, hopefully, will be successful.  Hint: it may take more time than you expect – in minutes, that is.
  6. If that fails, find the directory where the driver was installed and right click on the .inf file for your device.  Click on “install” in the context menu.

If one of those methods works, give your hardware a try.  If not, you’re may be out of luck.  Steps 1 & 2 installed one of my missing drivers and steps 1-4 got my other device to work.

I’m sure that this is not how Microsoft wants you to get these drivers up and running, but it seems to work.  If you’re stuck and your device manufacturer seems to be waiting for the final release of Vista to deliver new drivers, you may want to give it a try.

No warranties or guarantees expressed, written or implied . . .


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 November 25th, 2006  
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Surviving Thanksgiving

No, this isn’t going to be some rant about dysfunctional families or having to eat the same gross Thanksgiving pie that Aunt Lucille has baked for the last 23 years.  It’s more of a celebration of sorts.  You see, a year ago this past Wednesday (the day before Thanksgiving), my wife, two children and I spent the day at the Mayo Clinic in Scottsdale, Arizona suffering from rather severe cases of carbon monoxide poisoning.  This year, we decided to return to the same hotel where we were poisoned to get back on the horse, as it were.

A year ago, the otherwise wonderful Four Seasons Resort in Scottsdale had a problem in a couple of its rooms.  Apparently, there was some backup from the exhaust of the pool heater which, somehow, vented into the air conditioning system of our rooms.  We had the only rooms that were effected and the people that were in the same rooms the night before had no problems.  In the great cosmic spin the bottle game, the Coke bottle pointed at us.

Luckily, my wife woke up with a splitting headache and found me passed out in the bathroom where I had gone to get aspirin for my splitting headache (to be clear, the luck part is that my wife woke up at all).  The kids, in a separate room, were not as bad off, but were clearly effected.  The initial diagnoses, which called for a day in a hyperbaric chamber was changed to a less stressful day in the emergency room of the hospital attached to respirators with pure oxygen and gallons of saline IVs.  We were very lucky that the emergency room physician happened to be a toxicologist and was able to diagnose the problem quickly, which is apparently quite difficult because the symptoms are similar to a wide range of problems.

At the end of a long day breathing from a tank and drinking through our arms, we were able to join the family members we came to visit in Scottsdale for a pre-Thanksgiving get-together.  Obviously, we had an awful lot to be thankful for last Thanksgiving.  There’s nothing quite like a near-death experience to help straighten out what’s important.

This year’s stay at the same hotel has been much more pleasant.  Sure, there was a little anxiety considering we almost died here last year.  Who wouldn’t be a little concerned, right?  But I’m writing this on Thanksgiving morning and my family made it through the night (actually, I have a headache from the pitcher of margaritas I drank last night, but self-inflicted poisoning doesn’t count).  My daughter had a little trouble getting to sleep at first, thinking that the whole experience was “creepy,” but, in the end, slept like a baby.

Before my experience last year with the odorless killer, my attitude toward carbon monoxide poisoning was a passing curiosity, at best.  It happens so rarely, and even then most often when people do silly things like place unvented heating elements in their living rooms, that you never think it can happen to you.  I now know that no one is immune.  My family is among the lucky ones that survived it and we get to celebrate another Thanksgiving holiday with a whole lot to be thankful for.

 November 23rd, 2006  
 Misc Thoughts  
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A Coupla Interesting Books

I’ve been reading loads of fiction lately, but I squeezed in a couple of non-fiction books just to keep myself slightly aware of the real world.  The first was iWoz by Steve Wozniak (duh).  I was really disappointed in this book.  The jacket has a quote from Guy Kawasaki that states that “iWoz is the personal computer generation’s Soul of a New Machine.”  Sorry, while it’s interesting to learn about the other guy from Apple, the comparison just isn’t reasonable.  There are one or two chapters that discuss Apple, and you get a little feel about Woz and Apple in other chapters, but mostly, the book is Steve Wosniak’s memoir – and he clearly wants you to know that Apple was a relatively small and, perhaps, less-significant part of who he is than we might think otherwise.  Quick read; interesting guy; not what I was looking for.
The next book was How Great Generals Win by Bevin Alexander.  I really liked this book, but if you’re not into military history, it may be boring for you.  I’ve written several posts previously on the relationship between military leadership and business leadership.  This book offers a glimpse of the achievements of the greatest military leaders of all time – Hannibal, Mao Zedong, Stonewall Jackson, Napoleon, Rommel, Scipio, etc.  This is not a business book, per se, but I believe there are loads of business lessons that can be drawn from it.  A bit of a long read, but the author does a good job at building a flowing story around each general and his exploits.

 November 14th, 2006  

Valuation Tipping Points

As a somewhat active angel investor, I’ve come to the conclusion that too many startups are looking for money too early in their development these days.  Perhaps this has always been the case, but it’s become more obvious to me in the last 6-12 months.  In the last month, alone, I have seen three deals that each involved teams that wanted to sit back in there current big-company jobs while producing no more than a PowerPoint presentation.  No skin in the game, no special effort, nothing proven.  They have taken little-to-no risk and applied relatively minimal effort, so why should an investor? 

I’m a great believer that time is almost always the biggest competitor to any enterprise, but I also believe that there are certain milestones that need to be achieved to show that a startup is investment worthy (meaning that the company has a reasonable shot at success).  Generally speaking, the market does a good job regulating this.  For the most part, startups that have not made enough progress get crappy valuations (where crappy includes not getting noticed by investors) and startups that have made the appropriate progress get reasonable or even good valuations.  I refer to the difference between these two states as the valuation tipping point.

The interesting thing about the valuation tipping point is that there is no fixed criteria or plan of attack for reaching it.  Often, the tipping point is defined by the industry you’re in or by how you reach your customers.  Good friend and VC Brad Feld posted a while back on the fact that in a Web 2.0 company, the first 25,000 users are irrelevant.  If that’s true, then the tipping point for a Web 2.0 startup is going to be achieving more than 25,000 users.  Other companies, markets and industries will have different measures for the achievement of the tipping point – usually involving one or more of the following:

  • Achieving some level of revenue
  • Selling to a certain number of customers
  • Signing up one or more partners
  • Reaching positive cash flow
  • Demonstration of the underlying technology
  • Establishing a sales channel
  • You get the idea . . .

Sometimes a valuation tipping point will be as simple as getting an OK from the gorilla in your market that it’s cool to play in their playground.  If, for example, you’re using eBay’s API to build a business that doesn’t help eBay, investors will be interested in a getting some confirmation from eBay that they won’t 1) change the API to screw you or, 2) won’t drop a cease and desist letter in your inbox.  Before you get such a confirmation – bad valuation, after you get it – good valuation.

Recently, I looked at a deal that had three difficult hurdles to clear in order to even be on a path to success.  They were the development of the underlying technology; a relationship with a data provider required for their service; and a relationship with the distribution network.  They had nailed two of the three, but the third remained a huge potential barrier to success.  The company has yet to get any investors to make a move and until they deal with their remaining barrier, the company will probably not get funding.  After they take care of the issue, though, I believe that this startup will get a great valuation.

Do you know what your valuation tipping point is?  It’s probably going to fall in one of two general categories:

  • It’s going to be a big hurdle which you can’t control by simply managing your day-to-day business.  Most often, this involves a business decision that has to be made by another party and is not in your direct control. 
  • Or, it will require that you attain a level of business (measured by users, revenue, profit, etc) to prove market acceptance or competitive viability.  Often, that requires you to successfully deliver in multiple areas of your business.

Before you look for any investment you should make sure that you understand where your tipping point is and how you will overcome the barriers that make it up.  Even better, to maximize your valuation, get to the tipping point before you even look for an investment. 

Note: the most important valuation tipping point happens at your first round of investment, but it is not the only valuation tipping point.  Each subsequent financial round requires an analysis of the tipping points in your business and how getting to those points will impact the valuation you get.


 November 14th, 2006  
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Pint-Sized Vehicles Making Their Way Across the Atlantic . . . Safely

DaimlerChrysler’s Smart Car division has been spending gobs of money trying to make their diminutive vehicles acceptable to the US government and to American consumers as well.  Compared to what Americans are used to, these things are microscopic.  They’ve been sold in Europe for years (tiny cars are available in many other parts of the world as well, of course), but have had trouble making their way across the Atlantic, mostly because of safety concerns.

The British car show, 5th Gear (associated with Top Gear), destroyed a Smart car to see if these things are Chevy Suburban impact ready.  It looks like they are engineering marvels and, in fact, will take on the biggest freeway competition.  Of course, while the car may remain intact, decelerating your organs from 70-0 in a split second, no matter what size vehicle you’re in, is probably not a good idea.  Check it out in this video . . .


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 November 13th, 2006  
 Stuff with a Motor  
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TrueCrypt File Encryption

There are always certain files on my computer, especially my laptop, that I want hidden from everyone but myself; just in case . . . While Windows has a built-in encryption solution, it’s anything but transparent or convenient.  What I really want is a solution that does it’s job without me being overly conscious that it’s there and to be as secure as possible at the same time.  I don’t want to have to encrypt each new file that is created or enter my password 20 times during each session.

The other day, I ran across TrueCrypt, a free, open-source encryption tool that does everything I want.  TrueCrypt lets you specify a volume on your computer that will always be encrypted on the fly with no user intervention other than having to specify your password to “mount” the volume when you boot up or use it.  The volume doesn’t have to be an actual partition.  It can be a file (think of it as a virtual directory structure inside the file) anywhere on your PC.  I set one up on my PC and on a USB memory stick.  Piece of cake, although it took me a few passes to find the ideal setup for what I wanted.

TrueCrypt supports AES-256, Blowfish (448-bit key), CAST5, Serpent, Triple DES, and Twofish encryption algorithms.  While I neither have the brains nor the skills to try to hack my own encrypted volumes to see if the encryption is truly effective, testimonials I’ve read make me feel comfortable that I’m getting the security I believe I am.  After all, It’s not like I’m keeping national security secrets or anything.

TrueCrypt works fine under Vista, which I can’t say for many other programs screwing with the file system.  If you’re looking for a convenient way to protect your files from snooping eyes, this solution looks pretty good.


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 November 13th, 2006