BeyondVC

Professor Noam Wasserman of HBS along with individuals from J. Robert Scott, Wilmer Cutler Pickering Hale and Dorr LLP, and Ernst & Young LLP put together an annual compensation report for venture-backed companies.  If you are venture-backed and interested in participating and receiving a free copy of the report to baseline compensation for your employees, I suggest going to CompStudy to get started.  I cannot tell you how many times executives at my portfolio companies ask me for comp numbers for certain roles in their geographic area.  While there are biases in any report, it is helpful to get a few of these different surveys to make sure your new hire’s compensation requirements are in the ballpark.  One final note-if you want to be included in the survey, please fill out by February 28.

I was talking with a friend of mine yesterday about doing business development deals, and he was quite frustrated by the process that he was experiencing with one potential partner.  He was calling on the highest levels at the company and knew that the ultimate decision rested with an executive committee.  He met with 4 of the 6 members of the committee and each meeting seemed to be better than the previous one.  In his last meeting, one of the executive committee members told him to go to yet another person to get the deal done.  My friend was caught in a classic case of pass the hat.  Everyone was excited about doing a deal, yet no one was willing to step up and take ownership of it.  Before assuming any deal will happen, you need to ask yourself a few questions such as:

1. Who owns the relationship?  In the example above, everybody was excited about a potential partnership, yet no one stood up to champion the deal and own it.
2. Who will get fired for not doing a deal?  Every person has annual and quarterly objectives they need to hit.  If doing a deal with your company creates more work, then why should they do it.  However, if doing a deal with your company fits in the parameters of their overall goals, then you are probably in the right spot.
3. Who will implement the deal?  In many cases, VCs and entrepreneurs can do a great job calling on a high level with executives at a company.  However, the executives at a company do not usually implement the deal.  Once a deal is signed, you need to understand who the day-to-day interface will be and how you and your company can make that person look like a hero.

In conclusion, I told my friend to stop wasting his time with that company and to focus on other deals.  As a startup your resources are limited and some of the major decisions you make at a company are what you are not going to do rather than what you are going to do.  In other words, you need to know when to say no.  If you can do that earlier in a business development or sales process, the better off you will be.

Yesterday, I had the opportunity to spend time with the CTO of a major financial services company with a $1 billion IT budget.  In these meetings I like to learn about the major priorities and where the open opportunities for early stage companies exist.  The good news was that the company was very open to working with entrepeneurial ventures.  Priority number 1 for the organization was to standardize on a common architecture and infrastructure.  When the company deploys a new app, the developers should only have to worry about coding the business rules and not about what infrastructure to deploy and how to manage the application.  At the end of the day, like most large institutions, this company was focused on increasing capacity utilization and moving to an on-demand model where new applications can tap into a pool of resources, where these resources are monitored closely for performance, and where these applications can have real service-level agreements and chargebacks tied to them.  The company said it was still early in the process and that alot of the big vendors still do not address the needs.

The other major initiative was security.  We spent a fair amount of time talking about best-of-breed versus the single vendor approach.  While the company had a bias towards single vendor for most infrastructure buys, it certainly was an advocate of best-of-breed for security.  We talked about how a monoculture was not as immune to disease and attacks as a heterogenous environment.  What this means is not only layering security but also deploying 2 different security products at each layer to avoid company or product-specific attacks.  This is a big deal at lots of companies which is why, despite the intense roll-up activity in the security space, that new vendors will constantly have the opportunity to sell.

As always, I had the opportunity to find out where a few of my companies were in the sales process.  The big takeaway for me was that "you only have one chance to make a first impression."  What does that mean?  Well, in today’s environment, enterprises have the upper hand.  This means that most enterprise sales end up in a proof of concept (POC) or bake-off against other competitors.  So the first impression you make in the POC is the installation.  If it is hard to install, forget about it.  The logical conclusion your sales prospect will draw is that it is a hard to use product.  So while you spend time building some great features and making your product more scalable, do not forget to spend time, lots of it, in the areas that customers touch and see.  This means making the install process as easy as possible (this is where appliances can help in many cases) and making your GUI intuitive and easy to use.  If you can’t get this right, you will lose most deals or at least be fighting an uphill battle in a competitive bakeoff no matter how scalable or feature-rich your product is. I tried to get my company a second chance, but the impression was already made.

As I prepare for my trip to Israel this weekend for a board meeting, one piece of equipment I am sure to bring is my Plantronics DSP 400 headset so I can Skype with the CEOs in my portfolio companies. I have been using Skype for the last 6 months and can honestly say that it not only saves a ton of money but more importantly allows me to end the phone-tag game with my porfolio company CEOs and easily communicate with them.  Sure VOIP is great from a cost-saving perspective, but having presence is even more important in my mind.  I know when someone is available to speak and when they are not-no more wasted time with voicemails or I’ll call you back later.  As you know, as an active board member and investor much of the value add happens outside of the board meetings in ad-hoc in-person meetings and calls.  Prior to Skype I had all of the CEOs that I worked with logged into IM, and we would frequently have long, off-the-cuff exchanges throughout the week.  Well, with Skype, we can not only IM but through an extra click turn that into a high, value-add phone call.  Just like in customer service, not every exchange needs to escalate to a live phone call, but having the ability to easily point and click to make it happen is a huge benefit. Wait till Skype adds live video to its platform and the value of that conversation goes up higher.  Of course, the beauty of Skype is that as long as my laptop in logged into a network, I can easily make calls from anywhere in the world.  Since it is the holiday season and a time of giving, one of the gifts that I sent to a new CEO hire (will be announced in New Year) was the the Plantronics DSP headset.  I am now just waiting for him to get registered so we can start Skyping.