lying is bad karma

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Title pretty much says it all and I suspect everyone will nod their head
to this one.

What exactly is lying? Is it exaggerating?

I’m going to go out on a limb and say in some cases yes. I see
entrepreneurs exaggerate their revenue expectations, their speed of
development, their IP, and seniority of their previous roles. I don’t call
this lying.

Is the statement “I developed XYZ” true when you worked on a team of 20
people. I’m willing to take a pass on this. It’s not lying – I know no-one
develops a product by themselves. Still I’ll probably ask a few follow up
questions, What did you work on? For how long? With whom? But the
fundamental statement that you worked on XYZ is true. This can happen on
numerous projects not just the comp-sci example. Every success has a
thousand fathers (or mothers) I don’t think it’s unfair to take some
credit if you had a hand in it.

What I can’t stand is people exaggerating or outright lying about their
credentials. You either have a degree, or you don’t. You either took a
Computer Science degree, or you didn’t. You have an MBA or you don’t.
These things are binary. One’s and Zero’s. Yes or No.

People lie about this stuff all the time or they obfuscate the truth.

I now have three examples of Waterloo students calling their MBET an MBA.

Why do they do this? Probably because no one has a clue what the MBET is.
But it’s not an MBA, it doesn’t require the GMAT (no math!), has roughly 1
year of work experience. When you visit their MBET website at Waterloo and
click on success stories you get none, when you click on their ‘notable
alumni’ you get none. Maybe it’s because all the grad’s are lying and say
they have an MBA from Waterloo (which the school doesn’t offer). Why lie
about this – I have no idea… but it’s funny.

Others don’t lie outright they obfuscate. Obfuscate is a great word for
it. It means: Render obscure, unclear, or unintelligible. And reading some
people Bio’s you would have a hard time figuring out what they took as a
degree. Here are two copy-past jobs with names changed to protect the
guilty.

“Joe Blow has a degree from University of Alberta where he took classes in
History, Economics and Computer Science.” So what did he get?

Or “Jane Doe took business in Toronto.” So where did she go?

These are two examples among many. Truth is Joe Blow got an Arts degree in
Economics.. and he did take a class in CompSci in first year. But now he
works in Tech so it’s kind of uncool not to have a Degree in CompSci….

Jane Doe took her Business degree at Humber College in Accounting and Bookkeeping. But now
she’s an executive in a company that’s growing fast, everyone who works
for her is a York or UofT commerce grad. She needs to obfuscate.

Let’s be blunt… who cares if you have an MBA or an MBET? Took no compsci
classes when you were 19? The truth is very little of this matters.
You’ve got a company you cofounded, you’re there and presumable you know
what you’re doing… why risk the red flag being raised? It’s just bad
karma.

360 Reviews are better then an exit interview by your VC

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During a recent round I saw a clause that was new (to me) inserted by a VC firm out of the US. They asked for the requirement that any founder or member of the group of ‘key employees’ that leaves the company had to to conduct a ‘third party’ exit interview with their Partner on the BOD, without management included. They also tried to put some teeth behind by making it a requirement for the employee to keep their earned out equity when leaving the company.

Usually there are clauses of some sort similar to this in ones shareholders agreement regarding the exiting of ‘key staff’ or founders etc. but never had I seen the process explicitly give this right to an investment firm outside of the usual BOD duties. This was in addition to the usual ‘processes of an employee leaving the group.’ I asked why it was there. The answer gave me some pause.

“We’ve all been entrepreneurs at our firm and the first sign of something not going in a positive direction is usually a key member of the technical staff leaving or a founder looking to leave.  This is the symptom of something that we at the BOD level have a hard time identifying, we’d rather just goto the source and see if its something we should be aware of. Not have it from a secondary, biased person.’

For the most part I agree with this view that someone leaving a company is usually a sign of a problem, but it shouldn’t be the first sign. I’ve been pushing the companies I advise to conduct 360 Reviews once they get past eight to ten employees and I’m not the only one.

360 reviews conducted regularly can be a huge help for management, investors, the BOD and most importantly staff to identify problems early, before they lead to someone leaving the company.  This is one of the takeaways from my MBA at Ivey, Lyn Purdy, the professor who introduced them to me deserves a prize. I probably would have dismissed them out of hand, had she not shown how they build employee morale and retention, with things like numbers and examples. And in these days when each hire is an expensive process of technical prowess and ‘fit’ a review process can save you money. 

It was a 360 Review process that ultimately got the offending clause removed. The reviews would be conducted every six months, and be reviewed by management and the BOD – none of the other investors were particulalrly ecstatic about one investor group conducting exit interviews. I’d encourage founders to get out in front of this issue by having some thoughts around a process for employee feedback before it comes from your investors.

Some practical tips for the startup CEO

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I’m by no means an expert, but there are a bunch of practical tips I’ve learned about being the CEO of a startup from both being one and advising them. Since I don’t see them being posted to the wider internets I thought I’d share the first few that come most readily to my mind.

These aren’t head in the cloud tips (iterate and iterate, pivot & iterate, send out 50 emails per day, eat lunch with your team, etc.). I’m talking about the actual day to day things that you should do or not do. Learned from painful (or painful for others) experience.

1 – Don’t use direct deposit to pay your staff.

This has come up to many times now, so I decided to put it first. Direct deposit is great for everyone but the founder/CEO of a startup.

Why? In order to make a direct deposit system work you need to give them one to two weeks’ notice of who is going to get paid, changes from each pay period also cost money.

 Every startup will have a cash flow hiccup, its guaranteed. The CEO and founders will man up and skip a paycheck and let their staff be none the wiser on the cash flow issues. Unfortunately its harder to do that if you use direct deposit. The money needs to be there Monday night, Tuesday at the latest to make payroll for Thursday (Friday at midnight). Taking the founders off the payroll can sometimes take a couple of weeks (sometimes less). But if you can’t get all the cash into the account for the payroll – you’ll end up cutting checks come Friday. Your staff will know something’s up. And you’ll have to admit something is.

Direct deposit sucks for startups. Cut checks and pay monthly. 

2 – Sublease space or ‘rent a cube’ and never commit to more than 1 year on realestate.

Matt’s Rule of thumb – how old is your startup? Divide by two, that’s the maximum you should commit to anything like real-estate. This lesson is borne out by numerous examples I’ve been involved in. I’m not saying you won’t stay in a space longer then that number – but you’ll find that you shouldn’t commit to a longer one.

A great example is a fast growing startup here in Ottawa: 6 years old. At 3 years they moved out of their ‘founding space’ and moved into a great loft space with a 4 Year lease. They stayed there 1.5 years before moving into their ‘current’ larger space, it came with a 5 year lease (plus costs of upgrades). They’ve been in that space for 1.5 years and are moving into yet another larger space this fall. The fallout? The COO has become a local landlord and real estate tycoon (I exaggerate – sorta) as he tries to sublease all this space he now has.

People will say that’s an example of poor planning. I call it an example of conservative headcount and growth planning. Even if they had forecasted expected growth to be 30% higher than it ended up being, their real estate conundrum would have pushed it out another quarter or so… in other words try not to commit to anything for too long. Real-estate is the most expensive example.

 3 – Never talk about your ‘real’ job

I hate entrepreneurs who do this. They talk about the company they’re starting or running… then talk about what they ‘actually do.’ Don’t. If you’re not all in on what you actually are doing. No one else is going to be. I’ve written about this before.

Don’t tell people how you pay your bills today. Unless its your startup.

4 – treat potential hires like consultants.

People say not to do this. I’ve had people do this to me and I hate them for it. The world is against people doing this.

But there will come a time when you need to do this. Don’t feel bad, you’re just one of the many people who have done this. 

And its cheaper then actually hiring a consultant who you can’t afford.

5- Never pay your bills on time.

When I see companies paying their bills on time I ask if they’d like a free 3 month loan. They inevitably all say yes. “That’d be a huge help on cash flow”.

You can pay almost 75% of your bills late and get away with no late charges. Get used to that idea, it’ll save you  when you need cash. Pay as much late as possible. 

6 – never list a paid consultant listed as an employee.

Just don’t. Its silly looking. And investors will sincerely think you’re an idiot.

Consultants aren’t employess – if they were they wouldn’t be consultants. 

 

Go All In

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“You can’t be half pregnant.”

Founders need to take this as a fact and not just take it to heart. 

I spend a lot time of with people before they actually found their startups, they’ve usually got a customer, product idea or opportunity they want to execute on. The problem they have is letting go of their current jobs. They make good money, why give up that when they can work on the startup in the evening and on weekends – thats bootstrapping isn’t it? 

I’m sure they think they can execute like this. But, take it from me, its impossible to to do two jobs at once and do them well. I should know, I didn’t do two jobs well when I was both an Analyst at Wesley Clover AND the founder/CEO of JohnnyVoIP. I dropped more balls then I should have and it ultimately led to the failure of the startup. Was that the only factor? absolutely not. Was it a contributor? A huge one.

And why did the startup fail, and not my other job? Because ultimately a startup requires a lot more care and attention then anything you’ll ever be involved in. You need to be totally committed or you’re not. If you’re not all in, your staff, your investors, your customers, your mechanic, your mothers second cousin – all know you’re not. People will see it. 

You’ll be the guy working on something – but when people can still ask who do you don’t say your startup’s name you’re cheating on your startup. If you’re networking at an event and you’re still trying to get business for your devshop, you’re cheating on your startup. If you carry around two business cards, you’re cheating on your startup. 

I’m seeing this crop up a lot more with the ‘consulting’ and ‘pro services’ crowd, or students deciding between a startup or school – Mark MacLeod alluded to it on his blog recently. But let me add my voice to the chorus. When I started investing in startups I worked with some great angels. And one of them taught me two very important lesson’s – both of which I’ve heard repeated by others during my career. 

“Ask yourself, is this a Bridge or a Pier?” – for how to look at bridge loans/financings. 

&

“Are you all in here, because you can’t be half pregnant.” – showing the binary reality of whether you are truly commited, or not.

In an environment with megabacked Canadian Accelerators that will cover some of your costs to get to your MVP, you should really go all in on your startup idea. Because you’re competing with all those people who are all in, and no matter how smart you are, tenacity beats brains every time.

 

kik pulls together a magic financing deal. RIM better suit up in court.

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I’ve written about Kik a couple of times. Particulalry about how Ted Livingston (former Co-op at RIM) was being being sued for possibly using the “inside info” he gathered while working in their BBM group. I also pretty much said a financing was out of the question for them. 

Boy, was I wrong.

Today kik announced a $8 Million financing with some of the premiere VC names from south of the borderRRE, Spark, and Union Square.

So what does this mean for kik? They can excute on their business while they can also fend off RIM. A great win for them. 

What does this mean for RIM? They’re in for a protracted legal battle with a well funded startup and an even better connected board. And if as rumored they release a multiplatform BBM Client that competes with Kik messenger it could make for a much more interesting legal and PR tussle. Especially while they try and build an ecosystem around their new tablet.

Congrats to Ted Livingston and the rest of the Kik team!  Should be fun to watch the next steps.