Thinking About Thinking

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.

 

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.

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.

When Founders Refer To Their Company As “I”

Posted in Founder-Owned Businesses, Technology by larrycheng on November 14, 2011

Given Volition’s focus on bootstrapped high growth technology companies, we meet company founders every week that have built amazing companies with very little resources.  It never gets old hearing stories of how founders put companies on their backs and will them to survive and succeed.

Yet, in the process of meeting with founders week-in and week-out, I have begun to notice that with some regularity, certain founders refer to their company as “I”.  Often, I will hear phrases like, “I will reach $20M of revenue,” or “I will grow 100% next year and hit breakeven,” or “I will have the best technology platform in the market.”  On the face of it, it might seem objectionable to refer to the collective efforts of many people in a company with a first person, singular pronoun.  Yet, candidly, I don’t entirely begrudge the practice, but it also reflects a company that is still in the process of maturing.

I don’t begrudge it because there was a point in time when the company was quite literally just the founder.  If anything was going to get done, the founder was going to do it.  Even in the early days of a company where there are other employees, it’s not uncommon to have the founder be the senior person for every functional aspect of the business.  The founder is both the head of sales and by default the top salesperson.  The founder is the product visionary, product developer, and only QA person.  The founder is effectively the chief financial officer and the chief financier of the company.  And, of course the founder is the energy and spirit of the company.  I don’t begrudge use of the term “I” to refer to the company because for many of these companies, without the founder, there would be no company.

But, it also refers to a company that has some maturing to do.  Even if a founder is seemingly indispensable to a company –  like Steve Jobs, Jeff Bezos, or Sergey Brin –  a company must grow to the point where the center of the company isn’t the founder, but the center of the company is in fact the company itself, and its mission for its customers.  Ironically, the person best positioned to help drive this transition in a company is the founder.

Some founders adopt a mentality to keep things comfortable for themselves –  the strategy, people, and practices of the company stay within the comfort zone of the founder.  The founder structurally builds a company where they are at the center and in many ways the company exists not only because of the founder, but to serve the founder as well.  Other founders aim to build something bigger than themselves.  The company is not defined by their own comfort zone, but by the vision of what the company can achieve.   The company exists not for any single individual, but for its greater mission and purpose.  The company transitions from an “I” to a “we”. This can be an uncomfortable process for some founders, but often times it’s a necessary one in order for the company to reach its fullest potential.

I have immeasurable respect for founders.  Day-in and day-out, I’m rooting for the founders of companies that we invest in and even the founders of companies that we don’t invest in.  There are many people that work at a company, but only one founder or founding team.  It’s a special and unchangeable position.  But, for companies to truly succeed, they can’t just be about the founder.  They need to be about something more.  And, that’s perhaps a goal all founders can aspire towards.

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Google’s Spidering Rate Is 3000 Times Faster Than Bing In The First Month

Posted in Founder-Owned Businesses, Pop Culture, Technology by larrycheng on September 7, 2011

This is only one data point but I thought it was interesting.  About a month ago, my wife launched a website called Activity Yard.  It’s a website community where parents rate and review activities for their kids.  The URL was submitted to Google and Bing on the same day in August.  Out of sheer curiosity, I started to check the rate at which the two search engines spidered the site.  Fast forward about 4 weeks, and the results are interesting – Google spidered 3,000 times more pages than Bing.

You can see in this image – Google has spidered “about 12,000″ pages on a site search of Activity Yard.

Now, here’s Bing’s result taken on exactly the same day (today).  It only registers “4 results” for the same site search of Activity Yard.  It would have almost been better if Bing’s result was at 0.  Again, only one data point, but if this data point is directionally correct – Bing’s not even in the same galaxy as Google when it comes to spidering pace.

How CSN Stores Is Educating And Transforming Boston

Posted in Organizations, Technology by larrycheng on May 10, 2011

With increasing frequency, I hear about people in the Boston community going to work at CSN Stores.  This is the mega furniture and home goods e-commerce company that everybody likes to describe as “the biggest e-commerce company you’ve never heard of” – even though now I think everyone’s heard about them.  It used to be once every 6 months, I’d come across someone joining the Boston-based company.  But, over the past 2 years, it’s increased to about once every 3-4 weeks.

Interestingly, there are some common characteristics of the people joining CSN Stores.  They are young, bright, well-educated – and perhaps most conspicuously, they have no e-commerce experience (how could they being in Boston?).  And, that’s why CSN Stores could be transformative for this town.  You have former private equity professionals, recent college grads, rising stars in corporate america, and other walks of life all going to CSN Stores to learn the nitty gritty of building an e-commerce business from a company that is succeeding to the tune of $380M of revenue growing 56% per year. 

In the same way DoubleClick taught a generation of New Yorkers about online advertising and fundamentally transformed the start-up community in that region, CSN Stores could teach a generation of Bostonians about e-commerce.  I say “could” because the story of CSN Stores is still being written.  If CSN Stores stays independent, goes public, and grows from ~1,000 employees to 10,000+ employees.  I fully expect that 5-10 years from now, the legacy of CSN Stores will be a vibrant community of next-generation e-commerce companies started by CSN alumni.  And, that’s exactly what Boston needs.

Groupon Has Called Every Business In The United States

Posted in Economy, Growth Equity, Technology by larrycheng on February 8, 2011

I believe this could be a true statement by the end of 2011 if it was Groupon’s intent to do so (which it may not be). 

It’s very simple math.  Many industry sources put the number of Groupon sales reps at 3,000+.  The high end of the range is 4,000. 

A typical rep using an auto-dialer will probably call 250–300 companies a day.  You have to use an auto-dialer to get those kinds of numbers, which I have to presume Groupon uses. 

Usually of those calls, the rep connects with a live person 40–50 times per day.  Most of the calls result in a short conversation leading to a hang-up, but that’s the life of an inside sales rep. 

Figure that there are 225 business days in a year when you subtract out weekends and holidays. 

So the math is: 3,000 reps x 40 connects/day x 225 business days = 27 million businesses called.

According to business databases like Cortera and the US Census, there are about 27 million business establishments in the United States.  This is a generous number as only about 7.4 million businesses have payroll – but either way you look at it Groupon could very well call every company in the US this year, if they wanted to. 

Venture Capital (VC) Blog Directory – 2011 Edition

Posted in Technology, Venture Capital by larrycheng on January 19, 2011

This is the 4th edition of the Venture Capital Blog Directory (1st edition, 2nd edition, 3rd edition).  This directory includes 149 venture capital, microVC/seed, and growth equity blogs.  The imperfect statistic used to rank these blogs is their average monthly uniques in Q410 from Compete (more methodology info below).  Blogs that have seen increased traffic over Q409 by 1,000+ uniques/month are highlighted in bold.  There is an additional list below of VC blogs below that had insufficient Compete data.  To subscribe to the top 15 VC blogs through Google Reader, click here: Top 15 VC Blogs.  As always, if there is any information missing or incorrect, please leave it in the comment field.  Many thanks to my colleagues at Volition Capital for their assistance with this directory – we hope it’s a useful service for everyone.   

The Global VC Blog Directory (Q410 Avg. Monthly Uniques)  

  1. Paul Graham (@paulg), YCombinator, Essays (97,227)
  2. Fred Wilson (@fredwilson), Union Square Ventures, A VC (81,483)
  3. Mark Suster (@msuster), GRP Partners, Both Sides of the Table (53,655)
  4. Brad Feld (@bradfeld), Foundry Group, Feld Thoughts (38,821)
  5. Chris Dixon (@cdixon), Founder Collective, cdixon.org (20,988)
  6. David Skok (@bostonvc), Matrix Partners, For Entrepreneurs (14,173)
  7. Charlie O’Donnell (@ceonyc), First Round Capital, This is Going to be Big (13,970)
  8. Larry Cheng (@larryvc), Volition Capital, Thinking About Thinking (13,215)
  9. Dave McClure (@davemcclure), 500 Startups, Master of 500 Hats (11,127)
  10. Ben Horowitz (@bhorowitz), Andreesen Horowitz, Ben’s Blog (10,686)
  11. Jeremy Liew (@jeremysliew), Lightspeed Ventures Partners, LSVP (9,344)
  12. Bijan Sabet (@bijan), Spark Capital, Bijan Sabet (8,256)
  13. Ryan Spoon (@ryanspoon), Polaris Venture Partners, ryanspoon.com (7,828)
  14. Albert Wenger (@albertwenger), Union Square Ventures, Continuations (7,469)
  15. Roger Ehrenberg (@infoarbitrage), IA Capital Ventures, Information Arbitrage (7,182)
  16. Rob Go (@robgo), NextView Ventures, robgo.org (6,934)
  17. Josh Kopelman (@joshk), First Round Capital, Redeye VC (6,778)
  18. David Cowan (@davidcowan), Bessemer Venture Partners, Who Has Time For This? (5,993)
  19. Mendelson/Feld (@foundrygroup), Foundry Group, Ask The VC (5,963)
  20. Bill Gurley (@bgurley), Benchmark Capital, Above The Crowd (5,428)
  21. Jeff Bussgang (@bussgang), Flybridge Capital Partners, Seeing Both Sides (5,223)
  22. David Hornik (@davidhornik), August Capital, VentureBlog (5,157)
  23. Seth Levine (@sether), Foundry Group, VC Adventure (4,858)
  24. Eric Friedman (@ericfriedman), Union Square Ventures, Marketing.fm (4,706)
  25. Andrew Parker (@andrewparker), Union Square Ventures, The Gong Show (3,854)
  26. Mark Peter Davis(@markpeterdavis), DFJ Gotham Ventures, Venture Made Transparent (3,602)
  27. Lee Hower (@leehower), NextView Ventures, AgileVC (3,459)
  28. Christine Herron (@christine), Intel Capital, Christine.net (2,484)
  29. Will Price, Hummer Winblad, Will Price (2,348)
  30. Jon Steinberg (@jonsteinberg), Polaris Venture Partners, Jon Steinberg (2,318)
  31. Jason Mendelson (@jasonmendelson), Foundry Group, Mendelson’s Musings (2,171)
  32. Marc Andreesen (@pmarcablog), Andressen Horowitz, Blog.pmarca.com (2,151)
  33. Jon O’Shaughnessy (@j_oshaughnessy), Dace Ventures, jonoshaughnessy.org (2,095)
  34. Sarah Tavel (@sarahtavel), Bessemer Venture Partners, Adventurista (1,968)
  35. Ed Sim (@edsim), Dawntreader Ventures, Beyond VC (1,948)
  36. Mike Hirshland (@vcmike), Polaris Venture Partners, VC Mike’s Blog (1,910)
  37. Dan Rua (@danrua), Inflexion Partners, Florida Venture Blog (1,510)
  38. Rob Hayes (@robhayes), First Round Capital, Permanent Record (1,509)
  39. Matt McCall, DFJ Portage Venture Partners, VC Confidential (1,430)
  40. Mo Koyfman (@mokoyfman), Spark Capital, Mo Koyfman (1,422)
  41. Fred Destin (@fdestin), Atlas Venture, Fred Destin’s Blog (1,405)
  42. David Feinleib (@vcdave), Mohr Davidow Ventures, Tech, Startups, Capital, Ideas. (1,353)
  43. Rick Segal (@ricksegal), JLA Ventures, The Post Money Value (1,308)
  44. Alex Taussig (@ataussig), Highland Capital, Infinite to Venture (1,239)
  45. Christopher Allen (@christophera), Alacrity Ventures, Life With Alacrity (1,188)
  46. Nic Brisbourne (@brisbourne), Esprit Capital Partners, The Equity Kicker (994)
  47. Chris Fralic (@chrisfralic), First Round Capital, Nothing To Say (844)
  48. Ouriel Ohayon (@ourielohayon), Isai.fr, MYBLOG by Ouriel (799)
  49. Multiple Authors, Highway 12 Ventures, Highway 12 Ventures Group (780)
  50. Martin Tobias (@martingtobias), Ignition Partners, Deep Green Crystals (723)
  51. David B. Lerner (@davidblerner), Columbia Seed Fund, David B. Lerner (716)
  52. Baris Karadogan, ComVentures, From Istanbul to Sand Hill Road (615)
  53. Dan Grossman, Venrock Associates, A Venture Forth (614)
  54. Jason Caplain (@jcaplain), Southern Capitol Ventures, Southeast VC (599)
  55. David Aronoff (@dba), Flybridge Capital Partners, Diary of a Geek VC (539)
  56. Mike Speiser, SutterHill Ventures, Laserlike (490)
  57. Tomas Tunguz (@ttunguz), Redpoint Ventures, Ex Post Facto (441)
  58. David Beisel (@davidbeisel), NextView Ventures, GenuineVC (427)
  59. Eric Ver Ploeg (@everploeg), Metric Ventures, Pocket Watch (403)
  60. Allan Veeck (@aveeck), Pittsburgh Ventures, Pittsburgh Ventures (353)
  61. Ryan McIntyre (@ryan_mcintyre), Foundry Group, McInblog (314)
  62. Satya Patel (@satyap), Battery Ventures, Venture Generated Content (310)
  63. Saul Klein (@cape), Index Ventures, LocalGlo.be (306)
  64. John Ludwig (@jhludwig), Ignition Partners, A Little Ludwig Goes A Long Way (296)
  65. Pascal Levensohn (@plevensohn), Levensohn Venture Partners, pascalsview (251)
  66. Derek Pilling, Meritage Funds, Non-Linear VC (250)
  67. Kent Goldman (@kentgoldman), First Round Capital, The Cornice (217)
  68. Rob Finn (@robfinn), Edison Venture, Ventureblogalist (215)
  69. Rich Tong (@richtong), Ignition Partners, Tongfamily (190)
  70. Jeff Joseph (@venturepopulist), Prescient Capital Partners, Venture Populist (137)
  71. Chip Hazard (@chazard), Flybridge Capital Partners, Hazard Lights (131)
  72. Paul Fisher, Advent Venture Partners, The Coffee Shops of Mayfair (122) 
  73. Jason Ball (@jasonball), Qualcomm Ventures Europe, TechBytes (47)
  74. Ted Rogers (@vcbrazil), PPI Ventures, Venture Capital Brazil (35)
  75. Greg Foster, Chrysalis Ventures, SouthernVC (15)
  76. Michael Cichowski (@mcichows), Edison Venture Fund, Digital Goggles (14)

Other VC Blogs

This list includes other VC blogs that didn’t make the primary directory for one of the following reasons: (1) They don’t have any Q410 Compete data due to insufficient traffic, (2) There was insufficient data on the blog subdomain, or (3) They are a hybrid blog/corporate website meaning the actual blog traffic is hard to decipher.  They are in no particular order.

(Methodology:  We aggregated the unique visitors for each blog on Compete.com for Oct-Dec 2010, and then divided by three to get a monthly unique traffic score.   If blogs only had data for one or two of the months, it was presumed that the missing months had no traffic and the aggregate number was still divided by three.)

The Great Divide In Technology Stocks

Posted in Economy, Technology by larrycheng on January 14, 2011

There is a great divide taking place in the land of technology stocks.  The “New Guard” of technology companies have a cloud computing, recurring or transactional revenue story with promotional leaders and great spin.  The “Old Guard” of technology companies have big brands and huge presence among customers, but are viewed by some as stodgy and tired.  Here’s how the public markets are valuing these two sets of companies from a P/E ratio perspective:

The New Guard

  • Salesforce.com – 259
  • VMware – 136
  • Rackspace – 107
  • RedHat – 91
  • F5 Networks – 77
  • Amazon.com – 74
  • Netflix – 72
  • Akamai – 60

Median P/E ratio of “New Guard” Companies: 84

The Old Guard

  • Oracle – 23
  • Cisco – 15
  • eBay – 14
  • IBM – 13
  • Dell – 13
  • Microsoft – 12
  • Intel – 11
  • Hewlett-Packard – 12

Median P/E ratio of “Old Guard” Companies: 13

Is it fair for the New Guard to trade at a median P/E ratio that is 6.5 times higher than the Old Guard?  I don’t think so – it will not last.  It’s not to say that the Old Guard is undervalued, but eventually, the New Guard will come back to earth.  Eventually, the New Guard companies will trade at less than a 25 P/E ratio – it’s the law of gravity in stocks (consider that even Apple trades at a 23 P/E).  Given that, in the case of Salesforce.com, that means its P/E ratio will decline by 90% from where it is today.  The question is whether that multiple compression happens because earnings actually grow by 10 times, or because investors get more valuation conscious, or both.  Only time will tell.

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