Tag

entrepreneur

Leadership

Stop focusing on your startup valuation!

June 17, 2020

It never ceases to amaze me how hung up entrepreneurs get on the valuation of their startup as they raise money. It came up in a coaching session again yesterday.

In the abstract yes, valuation matters. It tells you how much of your company you are going to sell in order to raise money. It sets a baseline for you which you will (hopefully) exceed on your next raise. It’s a validation that your work has value.

But it is NOT a measure of pride, or ego, or size.

Your valuation, like a stock price, is a reflection of the perceived value of your company at the moment in time when you are raising money. There will be times when the startup market is hot and you can command more, there will be times when it has cooled because of an economic downturn, or a global pandemic, and your valuation will be lower. Or the market your idea is in is hot, or not.

What matters more than valuation is: Are you getting the right amount of money to give your idea life? Think about the next one, or two, major milestones you need to achieve to prove your idea will work and is scalable. Then figure out how much money you need to raise to get 90-120 days past the critical proof point. Add to that number to allow for the unexpected and that is how much you must raise. Once you have that you are looking for an investing partner who shares you vision and will be with you on the journey.

The other consideration is what value opportunity are you creating for your employees? The higher the valuation on funding the higher their option strike price and so the less money they will make when you finally reach liquidity. Now, if your company is a rocket ship, the difference between an option price of 50 cents or a dollar doesn’t matter, but at a later stage the difference can matter and when there is a preference stack on your company getting greedy can wipe out your employees’ opportunity. We’ve seen this happen with unicorns who achieved huge valuations only to have them come down dramatically on sale or IPO. So don’t lose sight of the need to make your employees money as well as yourself.

I have written before that all venture capital firms are not equal. Some are good, some are awful. The same applies to angels btw. I have seen short-sighted angels do more damage to young companies and entrepreneurs than I would have thought possible by focusing on their cut and not the long term health of the company.

It is more important to a) raise the money you need and b) find a long term investing partner than finding the best possible valuation. If you own 40% of your company but it is worth $20M at the end you have short changed yourself and the impact your idea can have if, instead, you own 15% and it is worth $1B.

Photo: Stone canon balls Jordan © 2017 Penny Herscher

Career Advice

So you want to raise money – chose your investor carefully

October 27, 2018

At least once a week I take a call, or a coffee, with an entrepreneur who wants advice on how to raise money. We talk about her product and market, the stage of her business, how good is her story and what her vision is. And then we talk about the tactics of raising money. How to get a warm intro to reputable investors, how to think about angel vs. seed vs. venture, how much to raise, what a strong pitch looks like – the usual tactical coaching.

Yesterday I was delighted that the entrepreneur I was coaching also brought up how to assess the quality of the investors. The quality of the firm and the individual. She’d had a bad experience in the past and simply did not want to have a poor quality individual in her deal.

Many entrepreneurs never realize how important this question is: all money is green but it is not all equally valuable. Investors, like human beings, come in all styles and since building a company is a marathon not a sprint you want to be running with someone who is enjoyable to be with and who will help you win the race.

First, pick someone who has the same vision and values as you. You are (hopefully) in your venture because you believe you can change the world (if you are doing it to get rich stop now because you don’t get rich in the startup world by trying to get rich, you get rich by building something) and it’s very important that your investors want you to change the world too. There are many, many tough moments of truth when building a company, and none more so than when you get an offer for your company before you think you are ready – before you have built the strategy and value that you believe is possible. That moment is when you find out whether your investor truly shared your vision on how to change the world or was just telling you he did.

It’s also important to pick a partner who can do heavy lifting for you when you need it. Great venture firms have a rich, deep network to help you recruit, develop partnerships, manage sticky HR issues and even find office space.

Avoid the money based VC (often a former investment banker) who’s motivated by running a portfolio, who wants to tell you what to do but has never done it himself. Find someone who walks the talk and builds great companies. Find a former entrepreneur who has really done it him or herself. If you can, find a VC who has been doing it for more than 10 years and has a great track record – and talk to their CEOs – or find one who’s been a CEO, built a good company and taken it public. All this is visible on their web bios.

And pick someone you enjoy being with. Most companies take many years to mature and if you are going to meet with your board a couple of times a quarter for 5 years it certainly makes the journey more fun if you enjoy interacting with them.

Sadly there are many entitled, think-their-shit-doesn’t-stink VCs in Silicon Valley. I could fill a book of stories of men who think they are rich because they are smart and that they don’t have to be courteous or helpful. Who are openly rude, dismissive and condescending. For comic relief – one of my most bizarre meetings was with a young VC whose firm had been in early at Google and he spent the whole meeting behind his desk checking the Google stock price and telling me how much money he had made. He was not the partner in the deal, just in the partnership, and yet he still thought it was all about him and I should be impressed!

But at the same time there are plenty of men, and women, who truly love working with entrepreneurs and have a very healthy respect for how hard building a company is. The challenge is you may have to kiss a lot of frogs to find your investing prince or princess. So manage your time and do your research up front.

Of course, in the end, you do need to get funded and you may need to take what you can get, but if you have the chance to be selective, the right investor is more important than the highest valuation because you’ll build a better company, have a stronger chance to change the world and make more money in the long run with the right partner.

Photo: Valetta, Malta © 2018 Penny Herscher

Career Advice

Five practices you can learn so that “I told you so” is a gift

August 11, 2017 Leave a comment

Does it irritate you when someone says “I told you so” to you?

You’d be quite normal if it does. There is nothing quite as annoying as having a know-it-all tell you that they knew better than you all along and you did not listen.

And yet, if you can check your ego, and if he did actually tell you so, then you’ve been missing a gift. Of course, this only makes sense if you are getting advice from someone who is often right, and who cares about you, otherwise it could be the blind leading the blind!

I have been fortunate enough to have two mentors who were not shy about telling me what they thought, and that I was an idiot when I didn’t listen. I saw one yesterday who, as we talked about the last couple of years, found not one, not two, but three times to say “I told you so”. By the last one he gave me a big grin and said “I think I told you that too!”

On the heels of the laughter, and the chagrin I feel that he was so often right, here are five practices that can help you milk your mentors for their wisdom and make sure you can hear it!

1. Learn to listen to business advice from people who have done it before. Whether it comes to building your engineering or service team, designing a big customer contract or hiring your first sales people if you are working with someone who has done it before, and who is respected, listen carefully. While their advice may not be perfect, and you may not like what they have to say, if they are willing to put the time in to work through an issue with you listen, take notes, and if you don’t follow the advice have a damn good reason. And frankly the argument of “you are not current” or “things are different now” is bs. While pace, technology and regulations changes, the fundamentals of what it takes to build a team and a thriving, profitable business are in common across a huge range of styles of company (as my mentor and I agreed yesterday comparing notes of the range of companies we are both working with now).

2. Pay attention to when someone is sharing a personal story with you. A story which is painful to tell probably has a strong lesson in it. If your advisor is sharing a major mistake they made dig in and try and understand what do they wish they had seen beforehand, or what did they see and ignored? Are there parallels for you today where you are avoiding something that is in front of your eyes but you don’t want to see it? This could be as far ranging as a personnel mistake, or a personal mistake!

3. When someone tells you something you don’t agree with, and your first reaction is to think in your head that you don’t agree – and so to argue – stop yourself and ask questions. I love the Covey habit “seek first to understand, then to be understood” and too few people use this habit. As someone who coaches every day now, I pick up very quickly whether an entrepreneur understands the power of questioning to figure out what they should know that they don’t know.

4. Pay attention when someone is angry with you. Either they are a jerk and have no business being angry with you, or they care enough that your reaction is upsetting them. Now you can’t take on everyone else’s issues, of course, but anger or intense emotion or stress is a guide that is often worth following. Don’t react with anger, take a deep breath, apologize that you have upset them, acknowledge that they care, and ask questions (see above) seeking to understand the source of their emotion. Maybe you’ve heard them but you are not being skilled in acknowledging that, or maybe you have not been listening. For myself, I have found the skill of active listening “I think you said xxxx, did I understand that correctly?” can be very powerful when an advisor is frustrated with me.

5. Follow the joy in business. Too often we spend time talking through what’s going wrong, and yet some of the best lessons I could have learned (and got an “I told you so” about later) were about where/how I was going to be happiest. Work can be terrific fun if you stay grounded and don’t get wrapped up in your ego so if someone who cares about you is trying to give you advice to “lighten up” (as one of my early mentors told me) do yourself a favor and find a way to ground yourself.

And if you can do all that you’ll be a better able to hear advice than most!

Photo: Villa Farnesina, Rome  © 2016 Penny Herscher

Leadership

5 reasons it’s critical to truly understand your P&L

July 20, 2017 Leave a comment
In the last month I have had the experience of three small business leaders talking to me about their P&L in moment-in-time terms. Something like this… for this quarter (or this year) we’ll make $X, we spend $Y less than I thought so we’re $Z ahead. Usually followed by why $X and $Z are so great, and how they’ll spend those extra dollars they are ahead, or why their company is successful as a result. Naive.

Unless you have a steady business that has been the same for a while, is not growing and is profitable the moment-in-time view of your business tells you very little. It might make you feel good that your bottom line is black and not red, or not as red as you thought it would be, but all you’re getting is the warm and fuzzies – no insight.

So, five reasons it’s critical you truly understand your P&L over time – to be able to answer what is your revenue, costs, profit/loss and collections every quarter (or month depending on the cadence of your business) for the last year and the coming 2 years?

1. Cash

Cash is Queen for a growing business of any size; it’s the fuel for growth and the security for longevity. So you need to see how cash flows every month for the foreseeable future. Unless you are selling products for cash in the local market, every sale comes with a delay in collection. Sometimes it’s when the credit card vendor pays you for your product, sometimes it’s 90 days later when your customer’s AP department pays you, but there is typically a delay. But you are paying your people anyway, and maybe opening up new offices, hiring etc ahead of being paid for your sales.

This means the collections line item in your P&L is critically interesting. What cash are you collecting every month, and so what is your ending cash every month after your expenses? You need to have this carefully modeled over the next 18-24 months, and intimately understand it so that as your business fluctuates and changes you know what it will do to cash flow. Combine this with a need to always have at least 6 months of payroll in the bank and this will tell you how much risk you can afford to take with your business at any moment in time.

I’ve seen businesses where the CEO is telling him/herself how great they are doing because of all kinds of positive indicators but the cash collections line is not changing over time, it’s not growing. You can’t hide from cash flow and so it’s a great indicator of the true underlying health of the business. Are the dogs eating the dog food and, more importantly, are they paying for it?

2. Measuring your progress

If your business is immature (less than 10 years old) then almost no matter what business plan you build for the next 24 months it will not be what you actually do. Something will change, you’ll do better, or worse, or differently than you thought. But having a 2 year outlook and then measuring yourself against it is how you’ll learn the nuances of the business and learn how to predict and measure the changes.

Going through the discipline of putting an 8 quarter plan together together to present to your stakeholders and your management team forces you to think through what assumptions you are making about your business. Don’t tell me you don’t know enough to do this yet – if you take someone else’s money, or even hire other people to work for you, then you are responsible, and that means you need to put your assumptions down on paper and fold them into a P&L model so you can measure your progress against your assumptions and course correct accordingly. You can’t correct your course if you’re not on one.

And don’t fall into the trap of comparing your business to last year’s business at the same time. While an interesting statistic it tells you nothing except whether you are growing. It does not tell you how you are doing against your plan and so how your top line and expenses are flowing into cash. See #1.

3. Learning financial management

No-one comes out of the womb knowing how to manage a P&L. Most students graduate college without ever learning how to read a P&L and a balance sheet (a crime I think) so no one expects you to just know it. If you are not a trained financial professional, but you want to lead a business team or be a CEO then you need to learn it. Step 1 take a class. Step 2 learn on your own P&L. Do the spreadsheets yourself until you understand the relationships between revenue and collections, costs and margin.

Yes you’ll need a CPA to do your books, but when it comes to forecasting the next 2 years of your business there is no reason you should not be able to build a simple model yourself. I despair of entrepreneurs who hand the financial modeling off to someone else, and never really grasp the financial dynamics and dependencies of their business.

4. Valuing your business

As I mentioned up front, unless your business is mature and not growing then how it is doing at any single point in time does not tell you much about it’s true value, except a low value such as 1X revenue, or 1X profit. If you want to establish and communicate the value of your business to, for example, a potential investor, you need to tell a story over time. Last year, and next 2 years at a minimum.

Except with mature businesses that generate cash, businesses are valued on their potential. How much revenue and profit will the business generate in the future? Is it growing, and so what does that mean for future cash flows? Should it be valued as a multiple of LTM (last twelve months) revenue or NTM profits?

Building, and deeply understanding, your business’ next 2 years of growth and being able to present it in a believable way (because you understand the dynamics so well) is how you establish value with an investor or buyer.

5.  Communicating with your employees

Your employees, or partners, are following you because they believe. Hopefully you’re paying them a fair wage, but they are probably with you because they believe in what you are trying to do. Even in a large company this can be true – people join a team because they believe in the mission.

So given they are following you, you need to keep them updated on how the business is doing so they can both help you solve problems, and celebrate with you when things go well. I am a big believer in sharing the basic P&L of your business with your leadership team at a minimum, and with your employees once it stabilizes. If they don’t have a good understanding of the future of your P&L how are you going to enable them to fully participate in the building of the business? And how will you celebrate the wins with them if they don’t know whether you are making the plans you set out or not?

I don’t buy the argument that employees are not able to handle the numbers – that it will “scare” them. Yes you don’t tell them you are running out of cash, but if you are hiring college graduates you can at least share your top line plans with them and if they don’t understand the basics of a P&L you can teach them. They will thank you for it, and be much more vested in the end results of the business if you share progress with them. I recently put together a 2 hour class on the basics of reading a P&L for a friend’s business (where most of the employees have liberal arts degrees) and it was not only great fun for me and the employees, but it gave them a starting point to understand the terrific progress the company they are working for is making.

Bottom line – whether your business is wine or weather prediction, if you are leading a team with financial targets, or are the CEO of your own venture, you owe it to yourself to learn and truly understand your own business’ P&L.

Photo: Photo Frescobaldi Winery, Tuscany  © 2016 Penny Herscher

Leadership

The importance of being humble

July 16, 2017 1 Comment
Photo: At the Jordan river where Christ was baptized and Israeli and Jordanian soldiers watch each other, guns cocked
We’ve all met this person in our professional lives. Smart but self-absorbed, in love with their own success so far, or with the self-importance of their title, or the size of their business, or how attractive they are. Executives who are so used to everyone catering to their every need that they forget to be courteous. VCs who are so used to entrepreneurs beating down their doors they forget to be kind (or worse). Entrepreneurs with hubris who think because they have raised money they are already a success. Lawyers and bankers who have been making so much money for so long they think their time is more important than the people around them.The behavior is irritating, but why does it matter? It’s not my place to moralize in the greater sense but in my experience the behavior does catch up with most people in their careers, one way or another, in the end.

Unless you have fast runaway success, or true genius (very rare), or are the Zaphod Beeblebrox, you are going to need the people around you for you to succeed long term. If you are arrogant it is hard to get your peers to want to work with you, or for you. Weaker people will, but the strong ones will move on. And, in the end, you are only as good as your team. People might stay with you while the money is good – attaching themselves to your coat tails – but when your company/responsibility hits a bump in the road, or they don’t need you, they will leave you.

Being self-absorbed might not hurt you at work because you’re the man with the big, hard-driving job… but chances are you are hurting the people who love you with your self-absorption. Yes, I am speaking from personal experience here both as the one doing the hurting and the one being hurt, and now observing professional friends who, in their self-absorption, forget who they are hurting.

As a good friend (and mega-company CEO) once told me: for the smart, strong, over-achievers it helps to think about life as a three-legged stool and all three legs need to be stable for your life to be balanced.

The first leg is work. How you get intellectual satisfaction and earn a living.

The second leg is fun. Family, friends, good times. How you find pleasure and love.

The third leg is spirituality, whatever that means to you. How you remind yourself that this is a huge, mysterious world and you are (no matter how important you think you are) just a small part of the grand scheme of things.

When the world is beating a path to your door, the money is rolling in to you or your company and the people who want things from you reinforce how terrific you are… how do you keep the third leg planted firmly on the ground?

A shock might do it for you for a while. A project fails, you lose a customer, you have a health scare, maybe you lose your job, but if you’ve done well in the past chances are you will do well again, so how do you keep the humbling realization that you are not the center of the universe with you?

Me, I find it in many ways. Through understanding history where the complex, messy story of our world and our humanity puts my insignificance squarely in perspective. Or through nature by hiking into the beauty of the mountains or the desert where I am reminded just how small I am. For some it is their God and faith. For some it is volunteering to help other people in need. What is it for you?

In my experience of powerful business leaders the truly great ones stay humble. Yes, they have strong opinions and expect to be listened to, but they also never forget who they are. The great ones treat admins, junior staff and vendors with respect, they put time into their family, they vacation with their friends, they are far from the entitled, the-one-with-the-most-toys-wins culture. They are the ones that people follow from company to company and remember with a smile for the rest of their lives.

How do you or I become one of them? I think that along with all the professional skills and opportunities in the world it is critical to remember who you are, truly, in the grand scheme of things and stay humble.

Written for a dear friend who tells me he is working on it.

My Personal Journey

How 2016 rocked my world as I talked with women entrepreneurs

January 4, 2017 Leave a comment
 I am more convinced than ever that there is a bright future for women entrepreneurs and 2016 proved it to me!

I stepped back from being a full time CEO a little more than a year ago. It was time, for family reasons, and I set out to change my life. I still work (I serve on two public company boards) but I decided to spend a great deal more time with my father and my family than I have ever been able to do before, and to prioritize my time to giving back. But I had no idea what that really meant for me – what could I do that was meaningful other than work as a CEO?

I decided that I would just say “yes” to every request for help from entrepreneurs, especially, but not exclusively, women. Not that I would be a pushover and do anything I was asked, but I would say yes to any request for a meeting from an entrepreneur who wanted advice. A first meeting at least and if I thought I could make a difference I’d keep saying yes. I wish I could say I was inspired by Shonda Rhimes’ TED talk but I did not see it until I was well into the year. Instead I was thinking of it as following breadcrumbs without knowing where they were going to lead.

It’s been an extraordinary year, it’s taken me in directions I never would have expected, and it’s changing me.

I’ve met with many amazing female entrepreneurs. Aged twenties to sixties. A psychiatrist who has figured out how to use technology to dramatically reduce the cost of cognitive testing for veterans with PTSD or the elderly with dementia, a media executive with a passion for travel who’s changing how people explore the world, a technologist who’s figured out how to measure skin tone so you can buy the right makeup for your skin, a CEO with an IoT product that can tell you all about the water leakage risks in your commercial property assets (something I did not know was a big problem), a woman revolutionizing the sex tech industry, a woman with breakthrough security technology to protect your phone, a visionary who set up the first and only incubator in Gaza… a new calendaring app, a better travel itinerary planning app, a next generation geospatial model, better on-chip failsafe technology, the artistic director of a ballet, networking technology, machine learning technology … the whole gamut! I have found I love talking with entrepreneurs and CEOs. I love listening to their stories about their businesses, what’s working, what’s scaring them, how they are getting funded.

I ask questions, ad nausea, and then focus in on one of two challenges they face and discuss with them how to overcome them. It’s fun for both of us, and I realize I can help many of them. No judgement, just the experience of being there myself more than once before. And I now believe, more than ever, it is much harder for women to get venture funding than men. I have far too many data points now!

I’ve met with women hedge fund managers who only invest in women led companies, recruiters whose only business is placing women on boards, bankers who want to do deals for women CEOs. The movement is happening. Women are, more than ever, proactively helping women. I threw a book party for Joann Lublin’s new book Earning It – the party was 3 days after our horrific election – and I saw ~60 women (eating my husband’s terrific food and drinking good wine) talking to each other about how this cannot be our future and becoming even more committed to make a different future for women.

But I also visited Israel for the first time and I was hooked. I found Israel fascinating and a historical goldmine but then I spent time in the West Bank with family who are orthodox settlers, and at the same time joined a small group trying to help Palestine with Silicon Valley technology. Wow, that is a complex area. I am reading like crazy trying to understand, but it’s also an area where young women are starting businesses and where I can help.

2016 wasn’t all about female entrepreneurs. I’ve spent 25% of the year in Europe. Driving with my Dad through France, quiet days with him in England helping him write his life story, Italy with my daughter, with my husband, with my sister. Enough time that I know I was truly present for my family, for the first time in a long time.

I am not unaware that it is a privilege for me to be able to do this, but I also now recognize that it is not only money that holds us in our jobs. It is also social status, recognition, a sense of being important. One of my new friends, now in her seventies, and who had a very big, high profile CEO job, told me one of the things she found most difficult about retiring was not being important any more. We are all, in our own ways, driven by ego and giving up the identity that defined me for most of my adult life has had it’s hard moments, like when a man asked me at a fundraiser what I do for a living and when I said I am retired he said “oh” and walked away. I’ve had plenty of “invisible” moments this year and it takes some getting used to.

We may feel it’s hard for women entrepreneurs in 2017, but the groundswell is growing. The number of smart women building businesses inspires me. The number of powerful female CEOs inspires me. And in 2017 I am open for business to help them in any way I can!

Leadership

The difference between being right and getting the right answer

October 29, 2016 Leave a comment
Entrepreneurs can be a hard headed lot. It takes courage, determination, a lot of luck, and sometimes just old fashioned, bull-headed persistence to create a company but as a result entrepreneurs don’t always listen well.But even if you know you resemble this description, ask yourself – is it more important for you to get to the right answer, or to be right?

You want to be right because your team wants to follow someone who knows what to do. You want to be right because it’s more efficient, and it increases your confidence, and if you’re right more often than you are wrong you have a good chance of winning. And if you believe you are right you are more likely to take risk.

But your potential investor wants you to be more interested in getting to the right answer than being right. When you are building your company you cannot predict what’s going to happen. You may switch markets, your customers may show you a different direction, the company may almost die more than once, you are certain to make some bad hires along the way. It is almost guaranteed that your journey will not be smooth.

As a result, it is much more impactful as an investor to work with entrepreneurs who are seeking truth, seeking to understand, seeking the right answer. These entrepreneurs ask questions, question themselves and try out ideas without fear of being wrong. As an investor you can dig in and problem solve with them. It’s more fun, it’s less frustrating, and you are more likely to get to a great end result together.

So when you are talking with potential investors, or even potential senior team members you want to hire, ask yourself how strong is your need to be right?

Boards, Leadership

Why you need a CEO on your board when you are the CEO

July 20, 2016 Leave a comment

One of the first decisions an entrepreneur needs to make once she has raised money for her great new idea is to build a board.

This is a conscious act. Yes, your investors probably have board seats, at least the lead investor will. If your investors are angels maybe 2 or 3 of them have demanded to be on your board. But beyond this crew you owe it to yourself to step back and think about who do you want on your board to help you build your company.

It is entirely reasonable for you to put one outside director on your board, and it’s an unusual set of investors that will not allow you to bring one new director on. And when you do, you want to bring on a current/former CEO.

Why a CEO? Why not a technologist, or a family friend, or your cofounder? Fundamentally, a current/former CEO is going to have seen your movie before and will bring a wealth of unexpected advantages to your board and your company.

Independence
Your board has a duty to represent all your shareholders, but more than that they have a responsibility to care for the company first. For your employees, your reputation, your probability of success. Having a board member who is truly independent of the investors can help bring a broader perspective to the board discussions. I have seen investors who are so focused on their own issues they lose sight of what’s best for the company. An independent director can take her role – as the one person who is not worried about the timing and size of liquidity but is instead worried about the long term success of the company – very seriously.

I met with a big time PE partner (let’s call him Adam – not his name) recently, who is sitting on a private technology board. As we talked he told me the CEO was dealing with the issue that he, and the other big time PE firm on the board have different agendas. One is a long term investor, one is interested in liquidity sooner, and the difference is a strategy problem for the CEO. The investors are balanced in ownership and the CEO is caught in the middle. I asked Adam “Why is this the CEO’s problem? Surely the CEO’s responsibility is to grow a great company and create the greatest value he can, not worry about negotiating between the two of you on the timing of an exit. It’s a ridiculous waste of his time”. Adam (figuratively) took a step back and agreed. I’m not on this board, but I can still make the case for the CEO not being distracted!

Resources
You’re going to need advice as you build your company, great advice. Yes your investors may know a few people, but you want to be referred to people who are not looking to your investors for future referrals, again who are truly independent. You’ll need lawyers (you want a pit bull in your corner unless you have truly world-class VCs), recruiters, marketing consultants etc. etc. And when you hire them you want to know they are loyal to you, not back channeling to your investors. An independent CEO should have a quality network for you to tap into.

Working for you
There will be times when you need to get something done but you are out of time and need some sleep. You can use your CEO/director to give you capacity. Maybe you need her to build a model for you, maybe you don’t know how to present an issue to your board and your director can build a sample presentation for you to help you frame the issue. At a minimum your director can do deep reviews for you of your own presentations, legal agreements, offer letters, compensation plans… with the eye of someone who has done it before.

Role experience
A high quality former CEO will bring experience of what the job really entails. What are you truly responsible for vs what decisions your board can make (which is very few in reality)? What does it take to build a world class team? What does it take to close your first few big deals? How to focus. Only someone who has done the job for many years really knows what it takes, and there are many investors out there who like to give you advice, but have never been in the role. Your director can be a sounding board for you in the role of CEO.

Being the bad guy
Your CEO director is not your friend, and sometimes she may feel like your enemy, but because her only reason to be there is to help the company, you can trust her even when you hate her. I’ve always had a former CEO on my boards, and sometimes it’s been absolutely maddening.

For example, the time my director attacked me in a board meeting and took me to pieces for a plan I proposed. Afterwards I asked him what the hell was he thinking coming after me in a board meeting? He humbled me by telling me he could see my main investor was winding up to attack and so he decided to attack me first so I did not get into a fight with my investor. He knew me well enough to know that if attacked I would attack back, and hard, and that could damage my relationship with my investor.

And for example, the time my director had a one-on-one with me and decimated my forecast. Destroyed my faith in every deal. Ripped every one of my sales campaigns to shreds. His motivation? To wring every piece of optimism out of my forecast so I knew the worst case and could then focus on what needed to be done to bring the probability up on each campaign.

Daily coaching
There are times when things go well, and then there are times which are rough. Raising money can be one of those times. Having someone you can call every day to review how things are going is so very helpful, and you cannot be calling your investors. You need a safe place to call. Someone who has no other agenda but to help you and the company succeed. And someone who has been there. That is a current/former CEO.

You may be thinking “well that’s self-serving of her given she’s a former CEO who sits on boards”. Yes, probably right, but right now I am meeting with many, many interesting entrepreneurs and I am hearing too many worrying stories of entrepreneurs who need better board advice and support.

Photo:  © 2016 Penny Herscher and from Buzzfeed

Leadership

Who needs sleep anyway

November 27, 2012 Leave a comment

Sleep. What a concept. As an entrepreneur it’s more rare than cash, and harder to come by.

As Mark Suster wrote in his recent blog post about Entrepreneurshit “It’s 4.50am. Sunday morning. And I couldn’t sleep. I have much on my
mind since I just returned from a week on the road. 5 days. 3 cities.”

Most nights I lie awake for 2-3 hours in the night. The gerbils running on the treadmills in my mind never stop. Problems. Opportunities. Equations. Spreadsheets. People. Endlessly running.

Until recently I worried about the sleep too. One more thing to add to the list – now let me worry about not getting enough sleep and what’s that going to do to me. My health, my ability to be smart and articulate in the big customer summit tomorrow. Aaargh!

But I recently learned that waking in the night is actually one less thing I have to worry about in those waking moments – it’s quite normal and may even be our natural sleep pattern.

In the days when we went to bed and got up with the sun, it turns out we would sleep in two sleeps – the first for four hours… then a period awake… and the second sleep for four hours. There’s a great description of the research in the BBC News report The myth of the eight-hour sleep. So maybe it all makes sense now. I am supposed to lie awake solving the problems of the day – but I need to get up and make a “hott drinke” as I do my email:

“And at the wakening of your first sleepe You shall have a hott drinke
made, And at the wakening of your next sleepe Your sorrowes will have a
slake.” Early English ballad, Old Robin of Portingale 

And on days like today, when I have had a couple of short nights, and I know YY has had less than 5 hours of sleep after a red eye flight in to NY to join me (for a series of really cool meetings this week) I tell myself we can sleep when we’re dead – coffee and adrenalin will pull us through.

And I believe it, until I go away for 3-4 days to a tropical island and end up sleeping 10+ hours a night, every night (something I do a couple of times a year) and then I know all those days when I thought I didn’t need to sleep I was kidding myself.

Ah, the necessary self delusion of the entrepreneur.

Career Advice

The Passion of the Entrepreneur

October 23, 2012 Leave a comment

“Collyer’s mother: Beware of passion Hester. It always leads to something ugly.


Hester Collyer: What would you replace it with?


Collyer’s mother: A guarded enthusiasm. It’s safer.”

Classic lines from The Deep Blue Sea, and the sentiment of the England I grew up in. Passion, while interesting in poets, was a sign of weak character. One should always maintain an even keel, and in times of trial, a stiff upper lip.

But when you’re building a company, or developing a new product, or growing a team, passion is essential. It’s at the essence of what you’re doing.

Bringing a new idea or product to market takes a level of conviction that, until you’ve done it, you cannot imagine. Everything sensible tells you you’re going to fail. Good friends question your judgement, your parents question the risk, your bank account gets annoyed with you, your children complain when you’re not around, even your spouse may have days when they wonder if you’re Don Quixote.

But passion carries you through. The desire to see your vision come to life, the thrill of winning a market and customers, the intensity of seeing your product finally perform magic, the agony of losing a deal, the excitement of getting profitable, the frenzy of a liquidity event (selling your company or doing an IPO). The synonyms for passion are the every day experiences of entrepreneurs.

If you don’t enjoy the heights of heaven and the depths of hell don’t become an entrepreneur. Or a CEO. Or a fast climbing, ambitious executive. Because the intensity it takes to create something from nothing, or break the glass ceiling, or change the trajectory of a company takes passion, and with it the boil of your blood, or the chill of your bones that comes with the roller coaster ride.

For the true entrepreneur there is no choice. It’s a drive they cannot resist. A vision they have no choice but to pursue. And if you feel that drive you are one of the lucky ones. There is nothing like it. Except maybe passion.

The Deep Blue Sea stars Rachel Weisz and Tom Hiddleston and is a gorgeous, sensuous and heartbreaking film about self destructive passion. Pour yourself a great glass of wine, settle into your favorite chair, hold your breath and immerse yourself.