Soaring on Ridgelift

Sway

One of the books I read during my vacation was "Sway" by Ori and Rom Brafman.  I'd previously read "The Starfish and the Spider" which Ori co-authored with Rod Beckstrom a little more than a year ago and so I was looking forward to reading the new book.

Sway is well worth a read – it deals with how our decision making process is influenced by external factors and behavior.  Two of the studies in Sway really resonated for me. 

The first covers the realities of hiring people and the pitfalls of standard interview questions.  Most interview questions are hopeless in really figuring out whether the candidate is a good match for the job and the case study drills this home.  If you really want to get an insight into a candidate, one of the best ways I've found is to use work sampling – get the candidate to participate in generating a meaningful work product that is relevant to role you need them to play in the company.  This requires a time commitment by both the company and candidate but it will give you a tremendous insight into how the person thinks, reacts and fits in with team chemistry.

The second is a very interesting discussion on how the US Supreme Court makes decisions and the criticality of a dissenting opinion to keep the process intellectually honest.  Sway devotes a complete chapter to this study and its highly relevant to the decision making process within a company – both at the executive staff level and the board level.

Sway is a quick read… once you nail down the time to open the book! 

Mobile Open Source doesn’t bring down the garden wall

As expected there have been a lot of articles posted about Nokia's acquisition and decision to open source Symbian, one of the older operating systems for cellular devices. There's a good review of the different contenders for "king of the mobile hill" on TechCrunch if you are interested.

Making the operating system "open source" doesn't change the dynamics of deploying mobile applications. Like it or not, the wireless carriers still have the whip hand when it comes to controlling the applications that run on the phone. It's still a walled garden.

I'm more hopeful about the iPhone and its impact to provide a more accessible platform for application developers. There are still a lot of limitations about what the application can do but it's a step in the right direction. I'd love to see Google's Android deployed but it's certainly taking a long time to see the light of day.

Unfortunately there aren't a lot of incentives for the wireless carriers to open the flood gates for new applications – especially those applications where the carrier doesn't see incremental revenue. More data on the wireless network means contention for bandwidth and cell slots for voice calls – system busy or dropped voice calls are more irritating to the customer and historically have been one of the primary drivers of subscriber churn.

I'm sure the lessons from the wireline world aren't lost on the wireless carriers (especially since most of them have wireline networks of their own) – in the limit, moving bits is a commodity business and the lowest cost provider wins. Being the lowest cost provider requires operational excellence and smart deployment of capital – always balancing capacity against costs. In the wireless world, this is even harder – so none of the wireless carriers are in a hurry to see a repeat performance.

What will it take to bring down the walls? My guess is that one of the weaker carriers will make a death or glory decision to open up and hope that enough compelling applications get deployed on their phones to build back their customer base. As much as Google may hope that new spectrum sales by the FCC with an "open" requirement will drive change, the capital to build out a nationwide footprint is a big nut to crack – if it happens, it will take years to make a dent.

In the meantime, we're left with RIM and the iPhone as deployment platforms – still a big enough customer base to provide a spring board for new applications but just like applications on Facebook, it's likely that only a handful of applications will win big. The key will be picking the RIGHT applications – an area I'm spending a lot of time on at the moment.

Expect the "walls to come tumbling down" slowly…

 

Look before you leap…

Part of being a venture capitalist is meeting with a lot of companies trying to raise money. Regardless of the stage of the company, the most common issue I see (and therefore the biggest hurdle to raising money) is a failure to think things through.

Thinking things through means having a picture in your mind about the different aspects of the company; what is needed to get the product/service to market, sell it, build revenue, become profitable and create value in the company.

Here are some of the most common failure modes I see:

• How does the product fit into the customer's environment?
• What is the sales strategy – how do you make more on the sale than it costs you to get?
• What is the likely response of your competitors (especially if they are large and profitable – read well armed!)?
• How is value built for the investors (M&A or IPO)?
• What is your contingency plan when things (inevitably) go wrong?
• What do you need to do to raise the NEXT round of investment at a better price than the current round?

No business plan is perfect but as a founder or CEO of a company, you need to have the bases covered. Basic issues such as these generate a quick "no thanks – not for me" – a.k.a "the pass".

Building a business plan is a lot like planning a long cross-country flight as a pilot. You have data that you know for certain such as where you are going, the route to be flown and the basic performance of the aircraft. You are also faced with a set of data that is less certain – the forecast weather, potential equipment failures, your own fatigue level etc. A good pilot examines the uncertain data and builds a contingency plan before committing to the flight. For example, if there is uncertainty in the weather the contingency plan may be take a different route, turn back, land or simply "don't go". The point is that this thought process takes place BEFORE you leave the ground.

Think your business plan through BEFORE setting out to raise money. If you can, find someone who has gone through the process of building a company – ask them to review the plan and highlight the issues they see. Upfront preparation will pay off so take the time for review and introspection.

An alternative title for this post could have been "Ready, Fire, Aim" but it just didn't work with the picture! Make sure you get the order right with YOUR business plan!

Back in the slot…

It's been almost a month since my last post – time has flown, consumed with intense work with one particular company followed by the last two weeks on vacation. So now I'm back in the slot and back to writing on my blog.

The inspiration for today's main post comes from meeting with a bunch of early stage companies over the last few days. A common thread ran through all of them which I wanted to capture. As I read through the list of issues that I highlighted there's almost a blog post in every bullet item… maybe I'll follow up on some of these topics over the next few days. Let me know if there are particular one's you'd like me to cover.