Thinking About Thinking

My Top 15 Favorite Audio Books

Posted in Books, Pop Culture by larrycheng on May 31, 2014

A couple of years ago, I switched off the radio during my daily commute and turned on audio books (through Audible). I’m usually in the car about an hour a day, and a typical book is about 10 hours. So, one book a month is more than reasonable. Here are my top 15 favorite audio books based on a mix of entertainment value, substance, and pure enjoyment. There’s not a huge delta between #1 and #15 – these are all worthwhile books to listen to.

  1. Unbroken, by Laura Hillenbrand: An epic story of survival that made me wish my commute wouldn’t end.
  2. The Last Lecture, by Randy Jeffrey: I won’t lie – shed some tears during this one.
  3. Battle Hymn of the Tiger Mother, by Amy Chua: Hilarious cultural memoir, not how-to parenting book.
  4. No Easy Day, by Matt Bissonnette and Kevin Maurer: I felt like I was watching an action movie blockbuster.
  5. The Everything Store, by Brad Stone: A total page turner about Jeff Bezos and the Amazon.com story.
  6. A Walk in the Woods, by Bill Bryson: I had no idea a book about a hike could be so entertaining and funny.
  7. Crazy Love, by Francis Chan: A great reminder about what’s at the heart of the Gospel.
  8. Bossy Pants, by Tina Fey: This book, read by Fey, is laugh out loud funny. Her comedy is genius.
  9. How to Win Friends & Influence People, by Dale Carnegie: Classic book with principles that stand the test of time.
  10. Radical, by David Platt: A challenging and stark look at the Bible in light of the American dream.
  11. Lean In, by Sheryl Sandberg: Some really prescient observations that make it a worthwhile read.
  12. The Locust Effect, by Gary Haugen and Victor Boutros: Powerful book revealing how violence impacts the poor.
  13. Quiet, by Susan Cain: An eye-opening book on introverts, that all extroverts should read.
  14. Money, Possessions, and Eternity, by Randy Alcorn: A biblical framework about money and giving.
  15. Francona, by Dan Shaughnessy: I love “behind the scenes” books. This being about the Red Sox was a bonus.

The 10 Slide Company Pitch Deck

Posted in Growth Equity, Technology, Venture Capital, Volition Capital by larrycheng on April 29, 2014

I love meeting with new companies.  To me, it’s the oxygen of this business and the most energizing aspect of the job.  That being said, the one thing that can take the energy right out of an introductory meeting is the obligatory 20-40 slide company pitch deck that drags on and on.  Personally, I prefer a more conversational meeting in which slides are used to launch conversations, rather than claim the entire conversation, about various important topics relevant to the business.  Therefore, I thought I’d provide a general framework for a succinct 10-slide pitch deck that should be more than sufficient for an introductory investor meeting.  Keep in mind that given Volition is a technology growth equity investor, this is more geared towards companies with some revenue and customers rather than a pure start-up.  But, I do think there are principles that are portable across different stages.

The 10 Slide Pitch Deck (in no particular order):

1.  The Problem Statement. This is the problem the company solves.  What is the problem, why is it such a high priority for whoever has it?  Why does this problem have to get solved?

2.  How You Solve The Problem.  This gets to what the company does.  Why do you have unique knowledge of the problem, how do you solve the problem, and why is that a differentiated / defensible approach?

3.  The Customer.  This gets to who the target customer is specifically.  The more detailed and segmented this is, the more credible I find it to be.  I’d rather hear, “The chief compliance officer at hedge funds with $100M+ in assets” than “financial services companies”, as an example.  Then provide examples of actual customers.  How many of those target customers out there actually have the problem you articulated?

4.  The Value to the Customer.  This gets to the return on investment.  How much does the customer have to pay (what is the pricing model), and why is it clearly worth it to them to pay it.

5.  Actual Use Cases.  Now that you’ve established the problem, solution and value in concept – let’s talk about it in reality.  If there’s only one primary use case, given an example of a real customer with a prototypical use case.  If there are 2 or 3 common use cases, let’s hear example of all of those.

6.  The Product.  This can go anywhere in the presentation, but if it’s at this point, I’m probably more than eager to see the product in action.  A live demo is always best.

7.  Competitive Position.  Who else out there is also trying to solve this problem, and why are you better positioned to succeed?  Why are you going to win your segment?  This is a great chance to talk about win-rates against competition, etc.

8.  Financial Overview.  A simple slide with historical and projected (to the degree you have them) income statement, balance sheet, and cash flows.  A couple of bullets on financing history and ownership breakdown are helpful.

9.  Other Key Metrics.  This is your opportunity to brag with the actual data that you consider leading indicators for your business.  Maybe it’s retention rate, lifetime value/CAC, upsell dynamics, customer or transactional growth, etc.

10.  Management Team.  Who are the people behind this company?  Don’t just put logos of past companies, but titles/roles, companies, and key achievements for each exec at their prior companies.  Also worth noting if there are any key hires you want to make.

Every company is different, but hopefully this provides a helpful framework to organize a simple pitch deck.  Don’t feel the need to address every sub-question with actual content on the slide.  You can always talk to the details during the presentation.  Often times, less is more when it comes to slide content.

My suggestion in terms of order is to start with the strongest aspect of the company.  If the management team is the strength, lead with it.  If the financial performance is the strength, by all means, lead with that.  If you’ve got a breakthrough product, start with a demo.  But, creating momentum in the meeting right out of the gate is always a good idea.

I’m probably missing something important, but hopefully this is helpful in getting readers pointed in the right direction.

 

The World of Finance Has Problems

Posted in Books, Economy by larrycheng on April 12, 2014

I have to shake my head in disappointment at the headlines this past week in the world of finance and money.  It makes me wonder why I even periodically come to the defense of the industry when in weeks like this, it seems like a fruitless exercise.  Here’s a tasting of this past week:

1.  LIBOR manipulation settlements.  LIBOR is the benchmark interest rate that impacts hundreds of trillions of dollars worth of financial contracts.  Everything from mortgages, student loans, car loans, derivative contracts, and many others are pegged to LIBOR.  LIBOR is calculated daily based on the submissions of some of the largest banks in the world.  And, in 2005-2009, it was apparently manipulated by some those contributing banks for their own personal gain.  This week, one of the chief offenders, Barclays, reached another settlement with a regulators over their behavior in this period.  How is it possible that one of the most important metrics in the global finance industry is manipulated over many years?  I guess it’s entirely possible.

2.  The stock market is “rigged” – according to author Michael Lewis.  His claim is that high frequency traders front-run stock trades all day and every day so that both institutional and retail investors alike pay what amounts to artificially expensive and manipulated prices on routine stock trades.  This is apparently legal, for now.  But, its potentially wide-ranging impact on the US stock market is coming to light.

3.  Alleged IRS corruption hearings proceed.  Claims of the IRS abusing power are came back into the forefront this week.  This has unfortunately become a purely partisan issue.  But, further information about the IRS suggests there’s potentially a bigger issue at hand than even what’s presently going through the House.

4.  SAC Capital pays largest insider trading settlement in history.  $1.8 billion is what it takes to settle one of the longest running, widest ranging insider trading scandals in history.

So, in one week, the headlines are about THE benchmark interest rate being manipulated for years, the entire stock market being rigged, the largest taxing authority in the US potentially corrupt, and the largest ever insider trading investigation being settled.  Clearly, this has not been a proud week for the world of finance.  Let’s hope better things are in store next week.

The Economics of Bananas

Posted in Economy, Pop Culture by larrycheng on January 10, 2014

Yesterday, I had the unexpected opportunity to speak with a former executive of a major fruit and produce company.  I always find it really fun to talk with someone about something I know nothing about – and in this case, the topic was bananas.  So, I asked him about the economics of bananas, and this is what he said:

  • Depending on location, retail price is ~$0.70 per pound.
  • That retailer buys them by the box which is 40 pounds.  So $28 is the retail revenue per box.
  • The producer charges the retailer $12 for the box.
  • The retailer also incurs additional costs for 7-days of storage and refrigeration at 56 degrees for ripening.
  • The producer pays $10-$11 in costs for that box ($6-$7 for pick and pack, $1 for packaging, $2.50 for shipping, and $1 of marketing/sales overhead)
  • Within a few hours of picking, the bananas are stored and shipped in refrigerated containers at 56 degrees.  Shipping can take 7+ days.
  • The picker probably makes ~$12/day and is paid per stem picked.

It’s always interesting to look at a supply chain of a product and decipher where in the chain you’d want to be.  In this case, I’m happy to be the one eating the banana.

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A Grounded Mentality On Year-End Compensation

Posted in Organizations, Philosophy by larrycheng on December 21, 2013

This post is prompted by a number of conversations I’ve had over the past several weeks with friends and colleagues in the technology and investment industries.  As year-end approaches, the primary topic of these discussions has been how they should approach compensation, bonus, and promotion discussions in their respective situations.  For the most part, we’re in a pretty good cycle.  The stock market is up.  The IPO window is open.  Technology is hot.  Things are good.  For the most part, these specific individuals can make a strong claim that they have performed really well.  And, for the most part, they come with the mentality that they expect to get rewarded generously for their performance.  At the highest level, I don’t have any issue with this point of view.

That being said, my guidance in these conversations is rarely about money, but about mentality.

First and foremost, we need to remember that it’s easy in the good times for us to take too much credit for our success.  While undoubtedly we may deserve a lot of credit, in reality, our successes are probably dependent on other factors as well.  Our success probably begins with someone giving us the opportunity to be successful, even when it might not have been obvious that we deserved that opportunity.  There are probably many people around us who have contributed to that success – whether professional colleagues, family and friends that supported us, or that one person whose vote of confidence made all the difference.  Our professional success almost always has some dependency on the assets of the company that we work at – assets which we may have largely inherited.  Especially in the investment business, our success is also influenced by external factors completely out of our control like economic growth, Fed policy, the stock market, and consumer sentiment.  Before we claim full credit for our success and expect to get paid accordingly, it’s important to be grounded in the reality that our success is never solely our own.  It would be a healthy exercise to thank some of the individuals that helped us achieve our successes this year, before going into some of these compensation discussions, to help get into the right frame of mind.

Secondly, we need to maintain perspective.  In the good times, especially in this business, it’s important to remember that bad times are inevitable.  None of us will have careers without hard times.  Therefore, we need to remember to represent ourselves during the good times in a way that we will still be proud of and not regret when the bad times come.  If we claim all of the credit and operate with a sense of entitlement during the good times, it’s very easy to erode the foundation of support from longstanding relationships that we all need to sustain us through the bad times.  Once we lose that support, we have lost something that is far more valuable than any near-term compensation.  It’s hard to see that when we’re in the moment, but it’s the most obvious observation in hindsight.

Finally, we need to remember that in the long run, it’s not money that will bring the most happiness.  The fulfillment of increased income is typically a fleeting fulfillment.  It’s often other aspects of a job that drive a person’s joy in their careers.  It’s working with people we enjoy and respect.  It’s being in a position to learn and grow as a person.  It’s about being part of something we value.  It’s about having fun and contributing.  It’s about being able to achieve professionally while still being able to be the person we want to be at home and with our families.  If we’re fortunate enough to be in a situation where all of the intangibles line up for our enduring professional fulfillment, it would be unfortunate to compromise that over something like money that will never quite fulfill us.

That being said, this doesn’t excuse people making compensation decisions from being generous with the talented people around them.  They absolutely should be.  This is more of a reminder for us not to lose ourselves in near-term financial decisions when over the long-run, so many other things matter more.

Start With The Problem

Posted in Founder-Owned Businesses, Growth Equity, Philosophy by larrycheng on October 23, 2012

After hearing dozens of company pitches over the last week or so, I noticed a common theme with how CEOs told the story of their business.  They typically expended great energy explaining what their company’s product or service does.  They will talk about features and functionality that no other player in the market has.  Where appropriate, they will dive into a demo to show exactly how their product is such a game changer.  While this is important, in some respects, I think it is putting the cart before the horse.

Personally speaking, I think a good story for a business starts with the problem that is being solved.  It’s hard to fall in love with a product, if you don’t believe it solves a big problem.  A problem worth solving is one that is a high priority issue for the one experiencing it.  It is a problem that is experienced to a similarly high degree, by a large and common constituency.  It is also a problem that people are willing to pay, and sometimes pay substantially, to resolve.

In every company pitch, the CEO will try to tell me what the company does.  But, you may be surprised that in many pitches, the CEO may neglect to really spend time articulating the problem their company solves.  Sometimes when I ask very directly what problem it is that they solve, the response will be a description of product functionality, not in fact a problem.  This to me is a telltale sign that the company was started to create functionality, not necessarily to solve an important problem.

If we were ever to get into due diligence on a company, we will likely spend as much time validating the magnitude and priority of the problem the company solves as we do on the merits of the product.  If we love your product, but are unconvinced on the problem it solves – we are unlikely to get across the finish line on an investment.  The reality is a company can control how a product evolves and develops.  But, the problem is what it is – so choosing the right problem to solve is critical for the ultimate success of any business.

So my simple advice is that when you tell the story of your business, start with the problem.  If you convince people of the problem your company is trying to solve, you have laid the foundation for them to love what your company does.

Can Online Privacy Compliance Even Be Implemented? Not Until Now.

Posted in Technology by larrycheng on October 12, 2012

It happens every day.  You visit a website.  Information on your visit is passed to a third party (such as an ad network).  That third party uses the data for purposes that is not something you’ve explicitly condoned.  For example, go to Zappos and look at your favorite red shoe.  Then go about your daily web life – and notice how that red shoe will show up in Zappos ads on other websites unrelated to Zappos.  This form of advertising, called re-targeting, happens because Zappos has given information from your site visit to various third parties who then run the ad.  But, what if you didn’t want Zappos to give any information on your visit to any retargeter?  What if you didn’t want your data given to any third party for any purpose at all?

A myriad of solutions have been proposed to address this problem, but they all revolve around the same fundamental framework.  The framework is that your browser communicates to the website you’re visiting whether you consent to being tracked through your data being shared with third parties.  And that website complies.  Here are some of the competing philosophies:

  • Every website has to explicitly ask you what your preference is when you visit it and then lock in that preference for future visits (e.g. certain EU countries).
  • You have to proactively opt-out of tracking in your browser settings, otherwise there is implied consent for all websites to track you (e.g. U.S. Do Not Track Legislation).
  • The default setting of the browser should turn off tracking (e.g. Microsoft).

While a disproportionate amount of energy has been spent arguing about the merits of these varying philosophies, they are all based on an assumption that is flawed.  The flawed assumption is that if a website receives notification from your browser that you don’t want to be tracked – they can actually technically comply with that request.  Think for a moment how hard that is.  The instant you hit a webpage, your tracking preference is communicated, and somehow that website has to turn off all tracking applications in the website before any of those applications run.  It all has to happen in a nanosecond.

To date, there have been two primary approaches to addressing this technically.  Both have their flaws.

  • Comply, after the fact.  This is referred to as “un-pixeling”.  The way this works is your browser communicates your tracking preference at the time of your visit, but the website does nothing differently.  You are still being tracked.  After your visit, though, the website communicates to the various third parties that they shared your data with that you did not want to be tracked – and then they expect that third parties honor that request by deleting your information in their records.  The flaw with this approach is it’s not actually compliant at the time of your visit, and there’s no guarantee of compliance after your visit either.
  • Centralize all tags.  Given that all tracking applications are tag-based, this approach involves putting every tag-based application on a website into a single tag management system (TMS).  By having all of the tags in a TMS, the website can then control whether the applications run after receiving your tracking preference information.  The flaw with this approach is two-fold.  Most websites don’t use a TMS, though I personally expect that to change very quickly.  The more important issue is that even in the most comprehensive TMS deployments, it’s never the case that every single tag across a company’s web properties sits in a TMS.  So, complete compliance in this model is not realistic.

So, where do we go from here?  Are we destined to have all of this debate on Internet privacy philosophies and policies, all the while lacking a realistic means to implement any agreed upon policy?  That was the case until recently.  Just this week, Volition portfolio company, Ensighten, received a patent on a novel approach to consumer Internet privacy management.  It’s finally a practical and easy way to comprehensively comply with your privacy preferences.  How does it work?

Ensighten’s privacy management platform is both simple and brilliant.  It only requires that a company puts a single line of code in the header of their webpage.  It then auto detects all existing and new tags on the page.  Then, when you visit a webpage with Ensighten’s privacy service running, it can automatically suppress any and all tag-based applications that require suppression based on your stated preferences and the regulations of your country.  Importantly, Ensighten can do this prior to any of these applications running.  This solution also does not require the deployment of  a tag management system.  Simple, comprehensive, and real-time privacy compliance has arrived.

So let the debate rage on.  Whatever the final answer is, there will now be a way to act on it.

Behind The Scenes Of An MSNBC TV Interview

Posted in Pop Culture by larrycheng on October 11, 2012

Periodically, some of the partners at Volition will do network television spots on shows related to business and technology.  Today, I paid a visit to 30 Rockefeller and the MSNBC studios to participate in J.J. Ramberg’s show, “Your Business” (also author of It’s Your Business).  The show won’t air until later, but this will give you a sense of what happens behind the scenes.

Prep Call

People often ask me whether or not I know what questions will be asked before going on the show.  In general, I know the topics that will be discussed, but the questions actually asked are far more fluid.  So, generally I prepare comments around the topics and then hope that the questions asked align with what I’m prepared to talk about.  If not, winging it is the only option.  But, the preparation still helps to think quickly.

Studio Arrival

It’s always a bit intimidating when you arrive at the studio, and you realize it’s the same studio used to tape all of the same shows you watch on TV.  In this case, the studio for MSNBC is at 30 Rockefeller.  The Today Show was taping when I arrived.  And, no, I did not run into Tina Fey.

Green Room

After making it through security, I’m ushered up to the green room.  Before I visited a green room, it sounded like a fancy place where the big TV personalities hang out.  In reality, it can be a rather humble room in some cases.  Typically the show that you will be participating in, if it’s a live show, is playing in the green room so you can get a feel for what’s going on.

Make-Up

I didn’t appreciate how important make-up is until I saw myself on TV without make-up.  Not a pretty sight.  It’s non-obvious when you’re watching a show, but everyone on camera has substantial make-up on.  It looks normal on TV – it looks abnormal in person.

In Studio!  

If it’s a live show, typically I get brought into the studio during a commercial break and have less than a minute before we go live.  It’s somewhat nerve rattling that right after the technician gets your microphone hooked up, you hear someone else counting down, “In 5, 4, 3, 2, 1…”  Today, it was a taped show, so there was a little less pressure.

On Air

When we’re on air, we’ve been coached not to look at the camera.  We’re supposed to ignore the cameras and simply have a conversation with the host and any other folks on the panel.  You can see all of the final segments on Volition’s “On Air” section of our website.

That’s the whole process in a nutshell!

Why Volition Capital Invested In Ensighten

Posted in Founder-Owned Businesses, Growth Equity, Technology, Volition Capital by larrycheng on September 20, 2012

Following up on my prior post, “What Is Tag Management”, this second post will be specifically about why Volition Capital invested in enterprise tag management leader, Ensighten.  Often when we announce a new investment, like we did with Ensighten last week, people ask me why we invested.  Hopefully this post will serve to help answer that question.  Let me emphasize that for any investment, the management team and the people behind the company is the most important factor.  That being said, I will start with some other key factors on why we invested and end with the most important one, the team.

#1: Clear Competitive Separation and Market Leadership

When a new market emerges that we think will be a high growth and strategic market, like tag management, we want to invest in the market leader.  While the term “market leader” is easily thrown around in marketing collateral, we use it sparingly when it comes to our investment decisions.  Our analysis on whether Ensighten is the market leader in tag management rests on a number of objective measures.

The first sets of measures are financially oriented.  Is Ensighten the largest and fastest growing tag management vendor?  Yes and yes.  We are very confident that Ensighten is the largest independent tag management vendor in the market based on revenue.  The revenue difference between Ensighten and the next largest player in the market is quite substantial.  We also believe that Ensighten is the fastest growing company in the market in terms of revenue growth.  These size and growth characteristics combined suggests that Ensighten is scaling aggressively and expanding its lead over the competition.

A second key measure of leadership is competitive win-rate.  When Ensighten goes up against its competitors in a sale process, they win 90%+ of the time.  This is an astonishingly high win-rate.  After talking to dozens of blue-chip, brand name customers who tested Ensighten against its competitors in proof-of-concepts (POC), we think Ensighten is winning because of superior technology.  I will expand on the technology later, but a 90%+ win rate is a clear indicator of competitive separation.

A third important measure of market leadership is customer retention.  Ensighten has a near 100% customer retention rate.  This means that once Ensighten wins a customer, they almost always keep the customer.  This level of retention indicates that the value the customer receives is extremely high.  When you combine these attributes: largest company, fastest growing, 90%+ win rate, and near 100% customer retention – we think Ensighten has both established and is extending its leadership position in the tag management market.  That’s a great dynamic to invest behind.

#2:  High Customer Value – Must-Have Product

We talked to dozens of Ensighten’s blue-chip enterprise customers including Microsoft, Sony, Seagate, Symantec, United, Dell, and many others.  Typically, Ensighten’s buyer comes from the marketing organization of these companies.  The customers communicated to us, both with their words and their tone, that in no uncertain terms, the value they are receiving from Ensighten is exceptionally high.  We think of value as the differential between how much pain the customer experiences from a problem and the delight of the customer when that problem is remediated.  On both measures, Ensighten’s customers measured exceptionally high.

In their own words, the key problem marketing organizations have before deploying Ensighten is a fundamental inability to do their job.  As I discussed in greater detail in my prior post, “What is Tag Management”, if adding, changing, fixing, or deleting a tag requires dependencies on IT release cycles that can run in intervals of many months – marketing is completely hamstrung.  They can’t modify website analytics with ease.  They can’t test different ad networks or tailor their website with ease.  They can’t deploy and customize important customer centric apps like chat, voice of the customer, and recommendation engines without substantial dependencies on IT.  They just can’t do their job.  When marketers describe this pain point – it’s very clear in their tone that the problem is debilitating.

On the flipside, when customers describe what life is like after deploying Ensighten’s tag management system (TMS), the joy in their tone is obvious.  It was clear to me that the dozens of customers we spoke with were smiling ear-to-ear on the other end of the phone when they talked about Ensighten’s value.  That’s rare in customer references.  Often times customers will say nice things to be polite to their vendors, but their tone will be more muted.  In Ensighten’s case, the customers were raving fans.  The reason is that Ensighten’s TMS gave these marketers unprecedented agility and control not to just do their job, but importantly, to do their job well.

#3: World-Class Technology

We spent an extraordinary amount of time evaluating Ensighten’s technology because the tag management space is noisy.  Our conclusion is that tag management is one market where the distinction between complexity in servicing basic tag management needs and enterprise-scale tag management needs is dramatic.  This market will evolve to be the tale of two worlds.  We believe that low-end tag management is a relatively easy technical proposition and will be commoditized quickly.  Conversely, we also believe that supporting the complexity and scale of large enterprise tag management deployments is one of the hardest engineering problems we have seen.

From inception, Ensighten has had four philosophical pillars underpinning all technology development.  1.  All Ensighten products must be able to be delivered through a single line of code.  2.  The platform must support all tag-based applications.  3.  The platform must support any device (e.g. PC, smartphone, tablet, kiosk, ATM, etc.).  4.  Everything must enhance page performance.  First of all, this is an outlandish vision in many respects.  Many would have said at the outset that it couldn’t be done. To those who would try, there would have been hundreds, if not thousands, of engineering decisions along the way where it would have been simpler to relax these constraints to get to market more easily and quickly.  But, Ensighten pulled together a team with both the technical genius and discipline to architect the solution that stayed true to these principles.

Adherence to these principles is why Ensighten now stands in the position of having the only tag management solution that can truly meet the needs of any and every enterprise-scale customer.  This is why Ensighten wins over 90%+ of the time against its competitors.  Ensighten’s entire platform was designed from the ground up with rigid adherence to principles that would ultimately prove to be critical to servicing enterprise-scale deployments.  After the conclusion of an exhaustive technical diligence process, we sat back and just said, “Wow.”  It became clear that Ensighten has a brilliant technical team that cares deeply about their engineering – and the biggest beneficiary of that is their customers.

#4: Large Strategic Market Whose Time Is Now

A year ago, not many people knew much about tag management.  We believe that a year from now, tag management will be known as one of the most strategic and important enabling technologies in digital marketing.  While Ensighten aims to be the enterprise leader in this market, we believe that thousands of companies large and small will be deploying some form of tag management in the years to come.  Large enterprises in particular will have to deploy an enterprise scale tag management system (TMS) like Ensighten just to be competitive.  Not having a TMS will soon be an unacceptable position for any enterprise whose web and digital properties are mission critical.

Tag management will become a critical part of web infrastructure as it sits between a company’s digital properties and potentially every third party application that interacts with those properties.  This position will be very strategic as the TMS will have potentially unparalleled visibility into the activity and data of a company’s digital properties.   Therefore, we expect the tag management market to evolve as quickly and as pervasively as the web analytics market.  We anticipate consolidation early in the lifecycle of the market, but also believe there is room for one or two significant independent companies – a position we expect Ensighten to occupy.

#5:  Talented and Trustworthy Management Team

Let me finish this post with where my interest in Ensighten all started, the management team.  Specifically, I connected with Josh Manion, founder and CEO, the first time in August 2011.  He was kind enough to return the cold call of an associate who was in his first month on the job (related post: What Happens After The Associate Cold Call).  I met with Josh five times before we seriously engaged in discussions on an investment.  Josh is unique – home schooled through high school, chess champion, MIT grad, and grew up in a small town in Wisconsin.  The first thing I came to appreciate about Josh is an alignment of values.  He’s a nice guy.  He’s trustworthy.  He’s a grounded and decent person.  He’s got old-school values which I respect.  The second thing I came to appreciate about Josh is he’s just inordinately smart.   The third thing I liked about Josh is he’s deeply competitive and wants to win.  Don’t be fooled by him being a nice guy – he wants to dominate.

As I got to know the rest of the management team, I could see Josh’s characteristics throughout the team – off-the-charts intelligence, good people, and fiercely competitive.  They also happen to be real domain experts in the field of tag management and passionate about the problem they are solving.  At the end of the day, it was our confidence in the team that was the deciding factor on our investment.

So, there you have it – that’s why Volition Capital invested in Ensighten.  Needless to say, we’re excited to be involved and honored to be part of the team.

What Is Tag Management?

Posted in Founder-Owned Businesses, Growth Equity, Technology, Volition Capital by larrycheng on September 14, 2012

This week we announced Volition’s newest investment in enterprise tag management leader, Ensighten.  I couldn’t be more excited to be involved with the company and to join their Board of Directors.  I was sitting down to write a post about why we invested in Ensighten, but after some thought, I realized it would probably be best to first write this post to explain what tag management is for those who don’t live it every day.   My next post, therefore, will be about why we invested in Ensighten.

So, what is tag management?  Let’s set the stage for the problem.

For many companies, their website is a mission critical part of their business.  Hence, to get the most functionality and intelligence from their websites –  the webpages themselves interface with many different best-of-breed third party applications.   You may not realize it, but when you visit a reasonably sophisticated webpage today, it’s probable that many different third-party applications are loading on that page because of your visit.  Some of these applications are visible to you as the end user.  Examples of these are ad networks, recommendation engines, video platforms, chat applications, social network plug-ins, re-targeting platforms and feedback engines.  Some of these applications are not as visible to you as an end user.  Examples of these are web analytics applications, a/b testing platforms, content optimization engines, audience measurement applications, affiliate networks and marketing automation systems.

The way these applications interface with a company’s webpage is typically through a tag.  Think of a tag as a little program that is inserted into the html code of that webpage.  When the webpage loads, the tag fires, and the application runs.  That tag contains the instructions for how that third-party application will operate on that particular webpage for that particular user.  For a web analytics platform, it could define what specific parts of the webpage to measure.  For an ad network, it could contain instructions on what type of ad unit to run.  For a feedback engine, it could set the parameters for what type of feedback module to render.  For an a/b testing platform, it could set the algorithms for how different tests will run.  Simple enough.

Here’s where it starts to get complicated.

First of all, the tag for a single application can take many different forms.  For example, if you want a different ad unit on one webpage versus another, it could necessitate a different tag even if the ad is delivered from the same ad network.  If you want the web analytics platform to pull different data from different webpages, which is often the case, that could require different tags.  In short, tailoring any application creates many different variants of tags from any single vendor.  So, the first complication is there are many different tags, within a single application vendor.

The second complication is that sophisticated websites have lots of different tag-based applications running.  In our conversations with Ensighten’s enterprise customers, they may have 10-50 different tag-based applications on any single webpage.  The volume of tags is driven by two things.  First, companies want best of breed functionality on their websites across all application categories.  Secondly, they may be testing different application vendors within each application category.  So, that adds even more complexity to the equation.

The third complication is volume.  A single website can have hundreds of thousands, if not millions, of webpages.  If a tag for a single application needs to be placed on every page, that can be hundreds of thousands of tags on hundreds of thousands of webpages for a single application.  Not only can companies have websites with lots of webpages, they may in fact have lots of different websites.  Many large enterprises have different web properties with distinct domains often in many different geographies.   Some enterprises have hundreds, if not thousands, of distinct web properties.  That obviously multiplies the volume problem.  Then throw on top of all those websites and all of those webpages –  tons of web traffic.

Therein lies the complexity: (lots of tags) x (lots of tag-based applications) x (lots of websites) x (lots of webpages) x (lots of traffic) = millions of tags firing every day to users like you and me from a single company’s web properties.  And, I won’t even start talking about other platforms like mobile and flash at this point.

That sets the context, now what’s the problem?

The problem occurs when you want to change, delete, add, fix or reconfigure a tag.  Think of a typical marketing analytics or optimization organization at a large enterprise.  They’re sitting on top of this sea of potentially millions of tags firing every day as users interact with their web properties.  Let’s say they need to change a single tag.  Maybe they want to run a different ad unit or capture slightly different analytics data.  Because that tag sits in the html code of the webpage, marketing must convince IT that the single change should be in the cue of the next release cycle for the website.  If they are successful in that, which is an if, then they must wait until the next IT release cycle for the website which could potentially be many months away.  Think about that, it could take months to make a single and simple change to one solitary tag.

In reality, large enterprises need to change tags all of the time.  Tags can be programmed improperly, so they need to be fixed.  The website itself could change which could necessitate a change to a tag.  Maybe they were testing an application on part of the website, and now want to roll it out to other parts of the site.  Maybe they want to take down an application or deploy a new one.  There are reasons why enterprises need to engage with their tags and their tag-based applications in a dynamic way.  But the current model of being beholden to the IT release cycle brings marketing agility to a halt.

That’s where Ensighten comes in.

Ensighten turns the entire methodology for managing tags upside down through its Tag Management System (TMS).  They start by placing a single line of code in the header of the website:

<script type=”text/javascript” src=”//nexus.ensighten.com/clientID/Bootstrap.js”> </script>

That’s it, one single line of code.  That code interfaces with Ensighten’s cloud-based TMS every time a user views a webpage.  The magic of Ensighten’s TMS is it enables marketing organizations to manage all of their tags without ever touching the code of the website.  That means they can now fix, change, add, delete, and reconfigure any and all tags in Ensighten’s TMS right there in the cloud without ever engaging with IT – and those changes will render on the webpage as if the tag was hard-coded onto the page itself.  It bears repeating, Ensighten enables this flexibility for any tag-based application.  Enterprises now have ultimate flexibility to try different applications, configure existing ones differently, and remove underperforming applications with complete ease.  What could take months, if not years to do, can now be done in a days with Ensighten’s TMS.  We talked with many of Ensighten’s blue-chip clients like Microsoft, Sony, Symantec, United, Dell, Seagate and several others – and the feedback was very consistent with this sentiment:

“For me to get a new tag added to the site or change an existing one, it would take 4-5 months.  In order to get that tag changed, I would have to go through IT, log a defect, get in a release cycle, fight and claw.  I was at the mercy of our bureaucratic IT processes.  This is one of the best things we’ve ever done.  I can go in and change tags within a day.  If I need to add something new, I can add it within a day.  It has made my life much easier.  I am in control of my own destiny.” – Fortune 500 Ensighten customer.

Hopefully that gives you a window into what tag management is and what Ensighten does.  I could go into how Ensighten does it, but that would be a longer post.  But, let me just say that what sounds simple required some really brilliant technical minds to come together to create.  We think the problem of tag management will be a pervasive problem.  We think the tag management market will quickly accelerate to be one of the most prominent sectors of the web because the problem is unavoidable.  And, we know that Ensighten has a significant lead in the market.  But, I shouldn’t get ahead of myself.  Now that you know what tag management is, my next post will be about why we invested in Ensighten.

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