Are You a CEO?

Are You a CEO? Is Your Boss a CEO? Are They The Right CEO for Your Company?

There are those who work as the CEO and those that don’t. The trick is in knowing which one you are.

Are you a CEO? Are you the right CEO for your company? This seems like a silly question at first, but one of the most important for a startup foundation team. In most one-person startups by default the founder is CEO; it’s difficult to resist the temptation of the title. But not all founders do this.

If the CEO not the optimal choice  but doesn’t want to admit it, beware, your startup could become an exercise in ego instead of a successful growth/job machine. There’s no formula or perfect background for the “perfect” CEO, and there are many degrees of success; in the end the proof is in the pudding. No one would have guessed Gates or Zuck would have been so successful, but they made it happen. Jerry Yang had many of the right ingredients, but somehow can’t make it as Yahoos CEO. Terry Semel was a great studio head but not a tech CEO. Meg Whitman got slammed trying to run for governor but she was and is a great CEO.

I see many non-CEOs trying to be one in my consulting work. This problem has to be fixed early in the life of a company once it becomes “real”. The first momentum a company has must be nutured like water in the desert;

The purpose if creating a startup is to create something that didn’t exist before – something out of nothing, and thereby create wealth, new money that can be distributed within and outside the company. Even in a non-profit this is true. That goal doesn’t work with the wrong leader at the top. How do you know? Usually you’ll feel it, from the people inside and outside the company. I often play “Shadow CEO” for early stage CEOs, which bridges the gap in experience for many leaders who lack experience but have the skillset. The difficulty comes when the current CEO just isn’t right to scale the business but wants to hang in, often for some very good reasons, but still the wrong choice.

It takes courage to remove yourself as a CEO, but I’ve seen and assisted in the process a dozen times to goos results. Please contact me if you know of any of these situations; they (usually) fascinate me.

The Second VC Round – A True Test of Scalability

The Second Round, or “B Round”, or “Follow On” round can be the achilles heel of a startup. It requires much more than a first injection of funding especially in the current healthy seed and angel investing environment.

No doubt the first round of external funding for a startup is usually critical to a startup as it can be the difference between continuing your startup or shutting it down. But it’s a different milestone than the second round of funding. The first venture round is often based on an idea, past successes, a business plan, or a market hunch. The decision to invest is based on an educated guess by investors. Often the investors are family and friends or angel investors, who have less sophisticated standards for measuring the likely success than top tier VCs.

The current phenomenon of Internet multi-millionaires recycling their money back into the startup markets is creating “super” angels like Ron Conway. For them, a $500,000 seed investment requires very little due diligence or proof of long term scalability. They sometimes invest in multiple companies within one meeting. There’s a slang term “spray & pray” describing this type of investing – put a little bit into a lot of startups and you’ll win by statistical odds.

The second round, however, is based more on cold hard facts. Is this company catching on? Have they built the foundation for the next 3-5 years? Does their product line hit the mark? Is it positioned correctly? What are the follow on products? Where is the market going?

The second round is often for some or all of the following – corporate growth, go to market, turn the prototype into a robust offering, marketing costs, or to hire a sales force. It’s no longer based on a hunch, unless the company is in trouble and needs money to finish what the first round started. (This problem often leads to a lowered valuation or “down round”. Not a great scenario.) If the company is doing well, the second round is easier to acquire. Facebook is a great example of this. They’ve had 9-12 rounds, depending on how you count, with investors still begging to get in. Their 2nd/3rd rounds were bigger than most startups ever see.

Facebook Funding Seed, A, B:

Total $2.34B
Angel, 9/04 19
Peter Thiel
Reid Hoffman
$500k
Series A, 5/05 20
Accel Partners
Mark Pincus
Reid Hoffman
$12.7M
Series B, 4/06 21
Greylock Partners
Meritech Capital Partners
Founders Fund
$27.5M
source: Crunchbase
The second round  can also be a mezzanine, or pre-IPO round, or even the IPO itself. In one scenario in my career I was with a company that had taken only one round of equity financing. With rapidly increasing revenues, we felt we had enough momentum and cash to execute an IPO without any more funding, thereby retaining more equity and control of our company, but we were getting a lot of pressure to take on another round. Our current venture partners felt we needed some insurance money in case of a downturn, more marketing money, a bigger team of investors, and a new logo. They turned out to be right about everything but the new logo.
Most startups that get a first round never make it to the second round. In todays soft-bubble economy this is more true than ever since so many first rounds are happening. Some don’t even want a second round. But the second round is truly a measure of scalability for your startup. Please feel free to contact me by DM to discuss more.  @tomnora or @cowlow

It’s all about Revenue – Continuously Scaling Revenue

This is an obvious one, but a point too many startups forget or ignore in early stages.

The purpose of a for profit business is to generate revenue, period. Avoiding this fact and/or not planning on it, focusing on it In most cases, the goal is to increase revenues continuously over time, i.e. scalability. It’s even more desirable to never have a dip in revenues, but this rarely happens.

There are tons of articles about many things about the startup world these days. Equity discussions, how to pitch, what’s hot, success and failure stories, etc. But very few articles about how to begin, grow and sustain revenues, what that process looks like or what to do when they stall.

There are also almost as many startups as the number of people I meet these days. Everyone has their own startup, which is usually little more than a reserved url, a $10 commitment and an idea. But can they produce revenues, increasing revenues over time profitable revenues? Can they create jobs? Stay in business for 10 years?

Google just announced their most recent quarter numbers: 26% increase in revenue year to year to $9.7 Billion. Now that’s a revenue focused company, pretty incredible for a 13 year old company to be growing that fast in a bad economy. Google’s original business plan didn’t even include their current main source of revenue – advertising. But they adapted quickly and haven’t looked back yet. Their admirable amount of revenue allows them to do so many powerful things their competitors can’t as well as contribute enormously to philanthropic causes. Not every startup will be a Google of course, but if you figure out how to continuously scale revenue or even maintain zero growth revenue, you can provide viable employment, profitability, benefits and even give back to society a bit.

So how do you do it? There are several components that must work together like a system that incorporate your products, your values, your people, outside advisors, investors and more. Having a great idea of course is key, but that alone won’t sustain you. This is where many startups trick themselves. “We have an amazing idea, so we will succeed. You must monetize properly, plan for hiccups, see the future. Most of all, Revenue has to be nurtured and protected  priority #1.

I’m happy to discuss this more, just send me a DM at @tomnora or post on this blog.

Responses: Santa Fe Friends + Cali Friends + +

Responses to my Santa Fe Friends + Cali Friends + + letter. In chronological order.
So you and Rich Murray became friends? how long did he last at NMCC?LOL
peggy
Hey Tom Baby!!! Im HERE!!!Patsy

Lets get together soon

Loved this message!
Thank you.
I have some good ones for you to meet.
Can you send more info on your social media (or otherwise) focus?
Peter

– Show quoted text –
> * **@tomnora* <http://twitter.com/tomnora>* |
> *@cowlow<http://twitter.com/cowlow>
> * | *LinkedIn <http://linkd.in/qwVquV>* *
Tom,Thanks for the thoughtful note. We miss you and look forward to seeing you soon.The NM Green Chamber of Commerce wants a ‘buy local’ app. Does such a thing already exist?Would you be interested (or know someone) in creating it? Alex works with the chamber and I know the folks involved.

Don’t get shot out there.

Joe

Sent wirelessly via BlackBerry from T-Mobile.

yeah very good friends. he runs the poker game! Not long with Jarrett. He barely remembers him.
Tom Nora ✆ to MeiMei
show details Sep 16 (3 days ago)
I missed the excitement of the real business world and the water.
I made amazing friends out there and enjoyed small town life very much, but needed to plug back in and wanted to launch a startup here.
New Mexico is a weak startup location – missing many parts and move too slowly. The best of both worlds is to have both, but I can only live in one place at a time.

Napa is probably similar to Santa Fe in many ways, I could see you living there. Hope all is well for you, have a glass of wine for me.


Tom: Congrats on your move, I wish you the best.

Enjoyed our discussions and adventures. Hope we can stay in touch and please let me know when you get back this way.

Best personal regards,

David

yeah just say when. lunches are pretty open. will you have a car?


T
Yes I’m interested, building up a strong little team here of app developers. Tell me whom to connect with. 
Also interested in Teres Kids progress. Did u guys get funding yet?

I’m sure 9/11 was a thoughtful day for you. Take care.
Tom,Wow, what a great letter, what a great way to catch us all up on your move.
As someone who still hangs on to her LA area code, I love your new city and consider it still “my city” even though after seven or eight years here,
I have to admit I’m not living there anymore.

I’m going to be out there in early October to attend Indiecade…do you have a free couch?

You should see my paintings!  I am making major progress!

I wish you all the possible best in your new environs and really do hope to stay in touch.

Note my new phone number and I cc’d you on my go-forward email address after I leave EPIC in January.

BE WELL!

Big hugs,
Stephanie


Good luck Tom, thanks for staying in touch.
Stephen Hadwin

Hi Tom. Thanks for your soulful update. Gotta get tough if you’re gonna stay in LA though! Just remember, compliment everyone on everything and you’ll fit right in. – JB

yes i’m back in the groove, moving faster, no mo “manana”, headed to Arrowhead today to catch up with OC friends.
Good luck, Tom. Let’s try to keep in touch.

I had a great weekend in San Francisco and I’m trying to figure out how to get back more often.
Need to start generating some income so I can afford a small apartment in the city.
Trying to figure out how to schedule a trip to India with my new partner in our social enterprise.
Anyway, give me a call when you get a chance. Enjoy the urban life.
Gary
Thanks for the official welcome – i’m stuck in town this weekend but could go next wkend if ur still painting. Are u painting walls or canvases?


Heather: Now that Tom is living in Los Angeles, it would be a real favor to my friend if you would drag him along to some events there so he
can get integrated into the social media and tech scene there.Stewart
wow.  Life changes, the one thing we can always count on.  Back in LA, must feel strange in some ways,
exciting in others. . . curious Tom, as we haven’t talked in awhile, what prompted the move?  And, did you rent a u-haul?
I know you like Nascar and all, drive fast and all, but somehow you and Frieda in a u-haul?  Nah. . .
I may be in LA to look at some projects there, so maybe we’ll connect.
Texas is unreal, even for me, but here I am.
Brazos y besos
Kathy


Iim at district 13 right now u gotta check it out.

Gonna miss you! I had no idea that you left to the bigger city.  I do get out there as my sister lives near you, in the West Hollywood area and my son, is enrolled at Claremont McKenna College.  

So, I’ll be sure to give a call when in the area.  Let me know when you are visiting NM and I’ll make a point of taking you for drinks.

 

Have fun and make a difference out there!   Lillian

  

Hi Tom—

Wow I had no idea you were moving!!! We are definitely going to miss seeing you and hearing about all your entrepreneurial experiences at our events.

Best of luck in California and next time you are visiting in NM let me know. J

Take care! Shandra

Absolutely.
Tom, please feel free to email or call me. Social Media Week LA is happening right now and I believe there’s some events
(looking into it). If not this week, there’s a few good events every month. Would love to connect.Heather

From: Stewart Alsop <salsop@

Realizing Your Astoundingly Great Idea… through Process and Execution.

http://sfist.com/attachments/sfist_jeremy/garage.jpg

Many dream of being the instigator or part of the “Startup Launch”: First Discussions, Initiation, Developing a business and product(s), and most of all Success. What many dreamers don’t realize is that all of these steps are the by-product of the core reason the startup is being formed – a great product or service. It’s not a TV show where Ashton Kutcher claims he’s an “Internet billionaire” and no one questions it; in the real world great startups become great companies by focusing on Execution of ideas into products and services. A startup becomes a sustainable enterprise by repeating the process over and over.

An idea in itself isn’t worth much, and this applies to the tech world more so than most other segments of industry. Because of the vast amounts of publicity lavished on Mark Zuckerberg, Steve Jobs, and the Google twins, many fashion themselves as making a few key steps and then finding themselves on the cover of Time, or at least in a million dollar home.

I often encounter people who have great tech ideas – friends, colleagues, employees, neighbors. Many are very good ideas; almost all of them drift away into the ether, unless someone else executes one of them. Then my friend will inevitably say “I had that idea! They ripped me off!” Or they tell me that I should execute their idea and then give them a percent of the “winnings”.

Ideas without execution are just talk, I’m a culprit also, for many reasons. I used to try to explain this to people when they approach about a tech idea, but it usually just bursts their bubble and they don’t quite hear the message. The act of execution tests whether the idea can become more – it causes validation, formation, proof of concept, exposes fatal flaws, creates adjustments, essentially turns it into reality or the discard pile. This process IS the company, extremely important and often misunderstood.

There are countless examples of startups that begin as one thing then morphed into something different – HP, arguably on of the first Silicon Valley garage startups, was first successful with an audio oscillator, which they built after very little planning or product thought. Their process was correct.

So your original idea is likely to change some anyway through the process. Other people will help take it over the line; welcome them. So please contact me if you’re anywhere along the startup road, and Ill try to help you turn your ideas into things that the world wants.

personal:  @tomnora

business:  @cowlow