You Need a BoD Now

Angel Investor, CEO Succession, early stage, SaaS

How to design a board of directors

By Tom Nora

There was an article recently in VentureBeat about how much control the startup CEO founder has over his/her board of directors. Unfortunately, this actually isn’t true in most cases, especially for first time founders, for many reasons.

Many factors come into play in early board formation including the founder’s goals, investors, cofounders, early appointees, family, friends. A well designed board can be the critical driving force in making a startup successful; while the wrong board can create disagreements, misdirection, angry members, awkward board dismissals, power struggles and can actually bring a company down.

First time founders usually aren’t sure how to populate the board, and first money from FFF (friends, family, fools) blinds them a bit to their best instincts.

Typical Pre-Funded Board

Here is the typical order of board formation before any professional funding comes in:

1. Founder/CEO

2. at least one Co-Founder

3. FFF

then maybe…

3. a “grown up” – former boss, relative, early (non-professional) investor

4. industry luminary

This is the group that must help grow the company properly, attract professional funding and make industrial strength business decisions. Most of this 1.0 group don’t have much experience, i.e. what it means to be on a board, how to optimize it, what the points of leverage are, what a natural disagreement is vs. a problem of discord. Usually the group is not experienced or cognizant enough to optimize this asset early on.

A Better Way

Here I’ll lay out some key steps to making this organization an asset rather than one with little to negative value.

Step 1 – The Founding Team
It’s fine to have the founder and maybe one cofounder on the board; after all that’s all you have to draw from. The key to success here is to STUDY the topic, learn everything you can, follow proper board.

Also, internally you can determine if and when you actually have something worthy of funding – you must have a real business that is operating – product(s), spreadsheets, a team, Revenues?; asking outsiders to get involved too early can be the kiss of death. I see this happen a lot.

Step 2 – Get Outside Help
In any startup ecosystem these days there are many people who have an interest in your business. The word “Startup” now gets their attention. Among these people are professionals that can get involved as a board member, but how do you do it? Which ones should be advisors instead? Are there consultants that help with this? If you’re near Stanford or in San Francisco, every other person you meet almost seems appropriate, but don’t be fooled. You want people who are qualified but also who come to you via an organic process – you read about them, stumble upon them, meet them.

Listen to these signals. For example, in Los Angeles right now the problem is that a majority of those you meet fall below the level of “qualified” – they’re out there networking but have never sat on a real board or led a startup. Keep asking around and you’ll find the right people. And remember, make sure you have a real company first.

Contact me if you have a going company and this is a hole for you, I’m one of the people I mention above who can help. But not if you just have an idea, or are thinking about starting a company, those are a dime a dozen.

Online Review Management – A Synopsis of my project with a review management startup.

Angel Investor, Business Development, CEO Succession, Revenue Growth, SaaS, startup CEO, Tom Nora, venture

I recently completed a short term project with ReviewInc (RI), an online review management platform for businesses to mange and enhance their review process. RI is a small Los Angeles are company that’s been in business for about 3 years with a couple of major pivots under their belt.

My role was to analyze all aspects of the company and then find their unique opportunities to “take it to the next level”. It opened my eyes to the fascinating ( never thought I’d say that about reviews) details of this market segment and its ubiquity in all important Online Marketing.

RI primarily needs to accelerate revenue growth and market share in order to build new products, increase salaries to market rate and defend their position against a large number of competitors. I found several areas of excellence as well as several more that need enhancement. In the 90 period of my consulting they made many positive changes in a short time period with their minimal budget.

> The Larger Market:

The Online Review infrastructure industry is highly under exposed in the overall Internet marketing world. When most people think of reviews, they think of negative reviews people write when they’re unhappy about their service at a restaurant or tire dealership. Even expert Internet marketers are pretty unaware of the market and its details. Until recently I was fairly unaware of this market, more focused on social, dat analytics, seo, superior web development, content management and CMS design as my priorities for Online Marketing projects and conversion. But now I realize “the review piece” should be considered in any Online Marketing strategy and execution. It’s content, social, seo enhancing and is impacting a vast majority of online purchasing.

Yelp pioneered 2.0 of this industry over 10 years ago and should be given credit for that. Now the market is estimated at over $10 billion revenue per year, probably a lot more if you include all the sub-markets and service agencies using it for their business development and product lines. It’s a lot more than restaurant reviews.

Online review management systems are an established part of the web for both consumer and B2B. In the consumer markets, 86% of all customers rely on online reviews when they buy something, and 72% of all people say online reviews are their top reason for choosing a local business. For B2B, online reviews and testimonials and becoming a requirement in healthcare, automotive, government and other industries. And there’s a ton of overlap, making the line pretty fuzzy.

No matter the segment, reviews directly impact sales, market position and business health. Yelp is the giant in the industry at a $4 billion market cap, but there are over 1,000 other review companies in all segments of business and consumer markets.  Other heavy hitters are Trip Advisor, Glassdoor, Angie’s List, Edmunds.com, NewEgg.com, La Fourchette, Menu Pages, Doctor.com, Best Buy, Michelin, Cityvox Avvo, IMDB, Call a Plumber, Brad’s Deals, HotFrog Gayot.com, Rotten Tomatoes, Ripoff Report and Zagat.

It is a quickly evolving market that will continuously challenge current players, as Yelp has seen as it has lost almost 50% of its market value in the past 12 months.

> Market Segments:

Online Reviews, Review Management, Restaurant Reviews, Employer Reviews, Movie Reviews, Social Analytics, Reputation Management, Customer Service Feedback, Review Aggregation.

> Company Summary:

Saas Product launched, several Fortune 1000 customers, currently growing. Self funded to date, 10-20 employees.

> The Bottom Line:

ReviewInc. is doing a lot of things right in product innovation R&D efficiency and anticipating user needs. They will have to continue to innovate and adapt to the market and win big deals to grow to a sufficient size to be a factor in this market; they have many direct competitors. They need to be sufficiently afraid of this ruthless market and use it for motivation. As Andy Grove says “Only the paranoid survive.”

If RI wants to grow faster they will need to take the company through the chasm and make critical changes to their management team, product line and UX. Not all companies want this; they would prefer to fly under the radar, so 2015 will determine which path RI takes.

Nasty Gal hits the wall? An E-Commerce Follow Up…

AdTech, startup CEO

As many of you know, I’ve been a big fan of the company Nasty Gal for a lot of reasons:

  • an L.A. story
  • Outsider non-techy female makes good
  • They’re Profitable!!
  • They have (had?) the chance to help define the next gen of startups

However, they seem to be in the predicament that many successful startups fall into. They may not want to be called a start up, but they are, because they never made it past PHASE 1 successfully into PHASE 2…

see Nasty Gal Lays Off Up To 10 Percent Of Its Workforce

  • PHASE 1 – Amazing idea or business model, luck, funding, hyper-growth, parties, t-shirts
  • PHASE 2 – Long term business success, sustainable, agile, adaptable business model, ability to survive major downturns, extremely happy employees.

Nasty Gal did many things right, I won’t list them all here. But they also failed in many ways already, and I won’t list all those here (I get paid to do that). I’ll sum it up with one word – Arrogance. I understand their feeling of invincibility; I’ve been there. What the arrogance did was cause them to not open their minds to the experts, not know how to let go of credit for success, not know whom to trust. I know this because I know several trustworthy experts who offered to help Nasty Gal repeatedly over the past 3 years, all rebuffed without even a response in most cases.

Nasty Gal didn’t realize the game gets tougher as time goes on and revenue goes up, unless you’re part of the Silicon Valley/Stanford/San Francisco in crowd, which they’re not. Marc Andreesen ain’t gonna save them, unless he can take over control and put a professional team in there. Continuous steady growth is one of the hardest things to achieve in business. It’s complex, chess not checkers.

Nasty Gal didn’t try hard enough to expand their popularity beyond the “cool people” that got them to $200 million, and they spent too much money on other things. Expanding and reforming your audiences is critical in continuing growth. Look at Facebook, Apple Amazon and others who successfully survived and grew for over a decade – they look much different than they once did.

So now what?

One of the things that can save a company when it goes into a bit of a tailspin is to lean on your employees loyalty to their management and love for your brand, because they’ve been treated well and respected as equal human beings no matter what their title is. The importance of this can’t be underestimated, as your employees tell everyone they know either good things or bad things about their employer. It looks like Nasty Gal will have trouble with that also. If you believe their glassdoor scores and reviews and “word on the street” in L.A., they are on their way back down the bell curve.

The bottom line value for any  company is their list of intrinsic value assets. For an e-commerce company selling trendy clothes online, assets have to come from many things other than the products, mostly from PEOPLE and the way they feel about the company and brand – employees, partners, consultants, vendors – but especially your lowest level employees. Don’t make your employees resent you, make them feel like your success is their success.

@tomnora

Silicon Valley Uber Alles? I think so… Some of their Secret Weapons.

Angel Investor, Business Development, CEO Succession, Drupal, early stage, founder, Hawaii, Jobs, Launch, Revenue Growth, Scalability, startup, startup CEO, Tom Nora, Uncategorized, venture

Can any other region “catch up” to Silicon Valley, or be the next Silicon Valley? Statistics show that it’s probably kind of futile to even try. Many have tried, but must be content with their small market shares. How can other regions will ever match the MACHINE: Stanford, Andreesen, Draper, Valentine, Doerr, Facebook/Apple/Google Millionaires, 4 Generation VC firms, Hardware/Software partnerships, over 100 Billon $ market cap cos.

svfundingshares

Because high tech and software industries are now being seen as lucrative, job creating, imperative and oh so sexy, many regions are trying as never before to get in on this – mobilizing their governments, old school industries, universities and grandmas to unite to be the next Silicon Valley, calling themselves Silicon- Beach, Forest, Plains, Alley, Prairie, Coast, etc. These towns are setting their expectations way too high while the real Silicon Valley giggles at the sight.

Here are some of the secret weapons that make Silicon Valley stronger than any other “region” and act as its barriers to entry:

1. Silicon – Uh, yeah, that word? It’s what started all this. Silicon Valley launched and was launched by the mainstreaming of the Silicon chip over 50 years ago, which is now part of everything. There was no other part of the planet where anything close in innovation, design manufacturing, equipment, marketing and sale of semiconductors has emanated from. This foundation still drives the area and the world, even thought it gets less attention now than the software side.

2. 100 Years of Growth – It all began with military electronics, low cost housing, lots of empty land and Stanford University. It has spread way beyond to the east bay. San Francisco, over 50 universities and trillions of dollars in revenue. The growth has had bumps but over time has increased more steadily than any other economy in history.

3. Recruitment – Most of the leaders in SV are from elsewhere because Silicon Valley aggressively acquires the best from all over the world. Why not? Via Stanford, Berkeley, Facebook, Google, recruiting Harvard and MIT undergrads, their wonderful PR machine, advertising free meals, free car washes, free dry cleaning, free day care. $150,000 salary right out of college. Unlimited vacation. Where else can you gat all this?

4. Stanford – Not sure this even needs explaining, but Stanford has been a wole new entity in the past 20 years, beyond anyones imagination in wealth creation, funding, computer science, a recruiting engine into SV then on to local companies, pride, confidence, location.

5. Money, money, money – There are so many giant sources of money in SV that it’s staggering. VCs of course, Angels, they invented the term Super Angel, San Francisco, Real Estate leverage, IPO millionaires, corporate funding, Asian and European money, and on and on.

6. Tolerance for Weak Links – Here’s one most people don’t know – most people in SV aren’t stellar; I know several weak players who fake it well and are millionaires or millionaires-to-be just because they’re in the right zip code. The public tagline is everybody has a high IQ, but in reality there are lots of dwebes running around – I know, I’ve managed plenty of them. SVs leaders smartly realize the win ratio can be pretty low if you have a few enormous winners. Most SV projects die, most SV companies die, but if you build the algorithm to plan for this you’ll put more possible winners in play. So what if a few totally unqualified employees that snuck in make a few million. Like any organization, there are several who skate by or get by on good politics. That’s OK if you plan for it, “engineer” for it.

That’s just 6, there are plenty more reasons why there will only be 1 Silicon Valley for along time to come. The best answer for any other local economy is to just make the most of who you are, embrace your own identity, partner with Silicon Valley. And don’t use the word “silicon” in your name. Take Boulder, Colorado as a model, they’ve successfully created their own very strong economy for startups. There’s a startup for every 50 or so people there. They have all the pieces and they are heavily connected to Silicon Valley without envying them.

@tomnora

CASH IS KING — C-A-S-H — Friction Cost Reduction — Accountants, Attorneys and Consultants

Angel Investor, Business Development, CEO Succession, early stage, founder, Hawaii, Revenue Growth, Scalability, startup, startup CEO, Uncategorized, venture

Most startup entrepreneurs focus on one thing throughout the lifecycle of their company: bringing in CASH. C-A-S-H. Cash through investments, revenues, borrowing from F&F, VCs, convertible notes, deal terms, angels, etc. All of these things are magical words to early stagers. I attend and host many meetups and conferences for startups, and consult to several startups, and every founder is inevitably talking about Cash. Cash on Hand, The next Round, we just need $XXX,XXX. Cash, Cash, Cash.

A different way to improve your cash situation is the indirect one – reduce Friction Costs in your ecosystem with peripheral influencers.

In Silicon Valley, Boston, Boulder and a few other places, the growth of the startup world has vastly been enhanced over the past 10 to 30 years by professionals who are not VCs or developers or entrepreneurs – they’re the Accountants, Attorneys, Consultants, Professors, Marketing firms and others who have tremendous influence over VCs, Angels and prospective customers. They are trusted, fairly impartial, focused, big picture and practical. They’re also critical to the processes of business.

If you want to make money rain from the sky, nurture these people with sincerity over long periods of time, not just when you need them. They decrease the friction in doing business by connecting the right people, finding the quickest path between 2 points, making warm vs. cold introductions and telling entrepreneurs when “it ain’t gonna happen”.

So find some of these people and get to know them – here are 10 things you can do:

1. buy them a cup of coffee

2. be real with them, when you don’t need anything.

3. Help them out with something they’re working on.

4. Read What Would Google Do? by Jeff Jarvis.

 

5. Join my meetup group; you’ll find many of them there and can connect no matter where you live:  meetup.com/Startup-Workshops/

6. Invite them to speak at an event you’re hosting.

7. Contact me and I’ll help you find and meet the right people.

8. Create something very cool, nothing gets attention like that.

9. Be a connector. Connect 2 people without any self interest; I do this almost daily.

10. Become an authority on the flow of cash in startups, a very valuable skill.

Tom Nora

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What does it feel like to be the CEO of a start-up? 3 FULL TIME JOBS.

Angel Investor, Business Development, CEO Succession, early stage, founder, Hawaii, Launch, Revenue Growth, Scalability, startup, startup CEO, Tom Nora, venture

Being the CEO of a startup is crazy, fun, very hard work, inclusive, humbling and of course can be quite rewarding. Weekends are meaningless. There is a continuous decision stream where each decision informs the next. Your mind is thinking 24 hours a day, even when you sleep.

When you’re the CEO of a startup, a real startup with product and some cash in the bank and/or revenue, there are 3 FULL TIME JOBS.

1. Raising Money – you are constantly doing this, preparing for this and thinking about this, whether it’s pre-seed, seed funding, debt, revenue, partnerships, IPO or other.

2. Managing and Properly Growing The Business – this includes several things, depending on the size of the enterprise: managing employees, administration, hiring, firing, leases, expenses, unhappy employees, fixing other problems, etc.

This piece is what often kills an otherwise great business, which justifys the case for less is more when it comes to employees and infrastructure.

3. Selling – The CEO of a startup must ABS, always be selling. You start every day working this, just like #1 above, they’re closely related. Using the CEO to close sales no matter what size the business is, is vital to success.

This piece emphasizes the importance of having an awesome, mature VP of Sales, if you can afford it; it takes a lot of pressure off and frees up the time of the CEO.

Overall, it can be the most exhilarating experience you’ve ever had, especially when things work. And it’s more accessible to most people than ever before. But it’s not for everyone – you must decide what your #1 goal is. If it’s to create a successful long term business, being the CEO should be something you’re willing to give up if it threatens goal #1. If your #1 goal is to try it out to see how it feels, then by all means do it, get professional help, and make the most of it. Contact me if you’re dead serious and I can help you. The Startup CEO by Tom Nora

Median CEO Compensation: $363K (private) vs. $9.6M (S&P500)

Business Development, CEO Succession, early stage, founder, Scalability, startup CEO, Tom Nora, venture

The median private company CEO compensation package totaled $362,900 in 2011 — just 3.8% of the $9.6 million median compensation package given to S&P 500 CEOs.

Median total compensation for private company CEOs increased only 1.9% from 2010’s $356,133.

The Board of Directors sets CEO pay in 58.5% of all private companies, but for companies with $100 million or more in annual revenue, this number increases to 73.9%.

Only 54.4% of private companies have formal long-term incentive plans for executives, but this number increases to over 68% for companies backed by private equity investors. There is high correlation between a company’s profitability and whether or not they have formal long term incentive plans for executives.

J.P. Donlon
Editor-in-Chief
Chief Executive�Magazine

 

The Executive Summary; Loosen Up a bit.

Angel Investor, Business Development, CEO Succession, early stage, founder, Launch, Revenue Growth, Scalability, startup, startup CEO, Tom Nora

 

1. The Executive Summary

I often get inquiries about getting involved in early stage companies here and around the country.

The beginning point to discussing a startup the Executive Summary of the company, which lays out the key facts about a startup in 1-2 pages. But I’ve noticed that in L.A. it’s the exception rather than the norm, people want to meet first. Real investors don’t usually work that way.

The Executive Summary is CRITICAL to getting prospective investors excited. Without it you have little chance of getting the next step – a meeting to discuss the project and funding, more team members, more ecosystem. It’s a key qualifier as a serious player in the startup world. You hardly ever see a Silicon Valley startup without one, no matter how early stage.

The pitch deck has replaced it lately, but that takes more time to read and it’s harder to find the key info quickly. (One exception to this is the deck Hank Cho sent me; one of the best I’ve seen in a while.)

So google “Executive Summary”, look at several and put one one together. Send it to me and I’ll critique it for you. Make it less words, more impact, numbers, facts, the team.

It will also show where your holes are.

 

1. Let’s Loosen Up

The current startup scene combined with our poor economic/job situation is causing many people to panic a bit. It’s understandable, but if it transfers to your persona as a startuper, it won’t help. Many people I meet are very rigid, look a little scared but fake a smile, unable to open themselves to criticism. This doesn’t get investors excited.

Sometimes a 20-30% change or add to your business can make a major difference. Not a complete pivot, that implies 90-180 degree change, but be open to suggestions by those who’ve been there before. Maybe change your name, change your graphics(!), merge/acquire/acq-hire, drop yours for another better one.

Let go of your ego, let go of some equity.

The goal is to build long term sustainable businesses and revenue streams. Add smart people to your circle for the bigger good of the company. Loosen up, smile, have fun. But make some money for everyone involved. Be better.

@tomnora

How LinkedIn Has Turned Your Resume Into A Cash Machine – Forbes

Business Development, CEO Succession, early stage, founder, Revenue Growth, Scalability, startup CEO, Tom Nora, venture

Great CEO Succession story.

Sales Driven company – finally!

 

How LinkedIn Has Turned Your Resume Into A Cash Machine – Forbes.

via How LinkedIn Has Turned Your Resume Into A Cash Machine – Forbes.

Cloning Startups: Blackmail, Duplication, 11 Pinterest clones, Overnight Cloning.

Angel Investor, Business Development, early stage, founder, Launch, Revenue Growth, Scalability, startup, startup CEO, Tom Nora, venture

Cloning Startups: Blackmail, Duplication, 11 Pinterest clones, Overnight Cloning.

And we’re not in a bubble?

Original startups are so Unoriginal that of course they’re getting ripped off…

http://j.mp/KRdQMK