Biology, populations and VC

The meadow voles we found each morning in our traps were tiny, hardy animals who endured the weighing and tagging before being re-released. There were thousands of them in the fields of Blandy Farm or Mountain Lake, the field research centers at UVA where we were performing research as part of our undergraduate degree programs.  The field mice fed on the seeds and fruits of the grasses and shrubs, storing food for the winters in their burrows. The burrows and seed travel were essential to healthy populations of the grasses and other fauna. Everything played together in a food web. Our sensors were advanced for the 1990s – the size of a clothing iron, they picked up the movements of specimens we tagged and released.

cuckoo-birdThe farms and research centers had plots that systematically studied forest succession going back 200 years – mapping which new plants and animals returned to, or fled from, forest land that had been cleared while the Founding Fathers of the US were still alive.  Mice populations would boom when trees were cut and grass could grow high, providing them with shelter.  As the trees grew tall, they gave grass-killing shade and provided perches for owls and other predators of mice.  Too many owls and the mice are gone, which then hurt the owls.

Finance Supply Chain

The financial services supply chain has many parallels to its food web cousin in biology.  A population of businesses is like any other species – paper makers beget more paper makers via spin outs or new plants.  Food companies beget more food companies.

Imagine the happy industry like the European magpie, with a growing clutch of new eggs (or future businesses) that it is happy to see mature.  But then the cuckoo shows up, representing venture capital.  The cuckoo lays its egg in the magpie’s nest and proceeds to fly away.  The cuckoo hatchling is bigger than the magpie brood cohorts.  It squawks the most, takes up space in the nest, many times pushing the offspring of the magpie out where they fall to their doom.  This is bad for the magpie, which raise the cuckoo as their own.

The cuckoo also needs the magpies to reproduce.  A population of cuckoos depends on the magpies, without which, there are no more cuckoos.

In the 2000s every ‘good’ buyout shop would talk about their database of companies and how it provided a proprietary sourcing angle.  Such data is easily available now on a subscription basis.  At the time the Internet was still a novelty.  The population of buyout-worthy businesses was over hunted, like the passenger pigeon or the American Bison.  Too many predators were released and they hunted their target population to the point where few are left.

It takes a great deal of time for populations in biology to mature.  Different, emergent behaviors develop over time.  It took decades for the buyout population which was harvested in this time period to develop, and the one that comes next will grow up in a very different economic environment.

[Seeing a group like Foundry support Tech Stars and bring in people like Chris Heivly is great.  The cuckoos need the magpies.  The populations play together.]

Image | Posted on by

6 Ways to Get the Most out of Day 2 – #ISUM16

It’s Day 2 of the Internet Summit in Raleigh, NC.  Here are six ways to get the most out of it, based on what was shared on Day 1.

  1. Enjoy.  You’re out of the office.  Like Al Madrigal said – you’re out of the office, put the phones down.  There were as many people in the room for the keynote yesteday as there were at Dreamforce 4 and the vibe felt the same.


    Day 1 Keynote

  2. Have a plan.  Arnie Kuenn of Vertical Measures reinforced this in his pre-conference work shop.  What is your plan to get the most out of Day 2?  Why are you here?  What metrics are driving you and how will you be sure you accomplished your goals.  Spend a few minutes looking at the agenda to make sure you’re getting the right input and think through how you will follow up afterwards.
  3. Learn.  Rand Fishkin‘s keynote talked through all the ways that conventional ideas of modern

    Fishkin’s reasons that content marketing fails.

    marketing and content creation can be wrong.  Learn the right ways to make data driven decisions to accomplish your goals.

  4. Think platforms.  Viveka von Rosen‘s coverage of the value of LinkedIn as a platform opened my eyes with her observation that, “This is a platform where the users are primed to buy, primed to make decisions.”  Everyone knows the value of Facebook as a platform, but Andrea Vahl‘s observations on how to work a prospect funnel and the impact of AB testing provided insight on the unique capabilities of this platform.
  5. Find tools.  Everyone gets better with the right tools.  Small improvements in yield matter.  The exhibitors provide resources and real value – I was a big fan of SwagChimp, and realized I needed to be using something like Calendly as well.
  6. Dogfood.  This hit home in Kuenn’s talk – if you are here to learn about best practices in modern marketing outreach, then you’ve got to live it in what you do.  His observation was that Vertical Measures couldn’t preach the value of content marketing as an agency if they weren’t doing it themselves – we can’t pass on the lessons learned here unless you’re using it in what you do.
Posted in Business, Disruption, Marketing, Uncategorized | Tagged , ,

The Best SaaS Product I Ever Saw was built by a Towtruck Company in 2006


Towtruck-as-a-Service in 2007.

In 2002, after joining a former customer in the electronics industry which had raised $30 million, we went through a CRM evaluation.  The VP of Sales and VP of Engineering were at odds over the rate at which we were qualifying customers for production, and it seemed logical that taking the data out of .xls and into a more modern method of analysis would help answer the necessary questions.  Many vendors wanted our business.  Oracle’s presentation included speakers, dim lights, fancy videos, and the first over-the-ear microphone I’d ever seen someone wear in person.  It also came with a ridiculous price, as did all of the other options save for one. came with a reasonable pricetag, and even if we failed, we would know quickly, and be able to sign up Oracle or one of the other vendors within half a year.  There was low penalty for failure.  Two years later working for  a private equity fund-of-funds, I turned to again to build our internal CRM infrastructure.

“Excel is your tool.  Like a hammer for a carpenter.  It is your tool.”  This had been guidance as an analyst starting in investment banking.  I turned to as a tool – my most recent implementation was just in 2015, and that was in the most challenging industry and cultural dynamic that could be encountered.  I didn’t understand that was SaaS until in 2004 the team at Emergence Capital approached the fund-of-funds I was with and pitched that a venture capital fund focused on the SaaS space would outperform others.  They defined SaaS – I’d never heard the term before.

“It is going to be possible to buy everything, anything, in the same way you pay for Salesforce.”

They were right.

I was fortunate enough to then spend some time with Internet Capital Group out of Philadelphia.  Their name had been spoken in whispers while working in banking as their market cap crested at astronomical values, before dipping down to reality.  They pivoted to focus on SaaS, which remains their focus as Actua.

Philadelphia is also the home of Milestone Partners, a buyout fund – and they invested in the best SaaS business I ever saw.  United Road Towing (“URT”) did not sell software.  Rather, they were a provider of towing services both to individual locations and to municipalities.  URT had invested heavily in software, and in so doing had built out a SaaS capability that was extraordinary given the timeframe.

In 2006 a URT driver could:

  •  Access their Panasonic Toughbook(TM)
  • Get route guidance to minimize traffic and fuel
  • Optimize loads for outbound and inbound trips to maximize profitability
  • Provide real time input to other drivers – “traffic stinks”, “there are lots of vehicles to tow here”, etc.

The tow truck industry wasn’t ready to be Uber-ized.  The team at URT had developed their capabilities internally.  They didn’t go sell them to other wrecker services.  Instead, they used what they had to dominate their competition.  Now they are the largest provider in the US.  They could use their know how to bid intelligently on large municipal deals.

Maybe now the world would be ready for ‘Towing-as-a-Service’, but at the time it wasn’t. URT didn’t try to force the X-aaS business model onto the rest of the world.  Instead, they just dog-fooded and won their market.  They are still winning today.

Posted in Illiquid Alternative, Industry, Innovation | Tagged , , , , , , , , ,

IoT Review: Yale Z-Wave Home Lock


Great software, lax support if hardware issues arise.

We recently purchased a Yale Z-Wave touchpad home lock that integrates with our home security system.  The online features through our security provider are fantastic.  We can add specific passwords for individuals, have them expire over time, set access hours and track usage.  This is really helpful for keeping an eye on the house while we’re away and makes it easy to let people in while we are out.

Unfortunately our use of the lock hasn’t been without some hardware issues.

Biggest Issue: Not Enough Support if it Doesn’t Work

Online reviews of this lock rave about the web-based functionality I’ve mentioned.  The reviews are overwhelmingly positive.  However, when this doesn’t work – there aren’t great systems for support.  Yale’s site is not 24×7.  [Yale has a consumer facing ‘portal’ – when I signed up it emailed me back my password in plaintext.] We purchased ours through our security company, which was helpful, but not immediate.  Our front door effectively became a wall at several times in the process.

Battery Issues

Our first lock drained 4 AA batteries per day for five days before we stopped using it.  We scoured the Internet, including the Amazon reviews, and this was a unique scenario.  We called our installer and they came and installed a new one.

Alignment Issue? Failure to Open

Currently our system can be finicky to open.  It looks like this is due to the installation – the lock is not well aligned, and if the lock experiences friction as it closes then it interprets that as a safety concern and is more difficult to open.  We’re going to have a lock smith come and check it out again.

Posted in Business, Methods | Tagged , , ,

Nice Pants: Tactical Office Wear

Comfort is difficult to quantify.  We tend to use air perm as our primary metric when working with water barrier materials.  There are many high-end pants now on the market from non-traditional vendors with unique angles on comfort.

1a& 1b: Under Armour’s Match Play Vented Pants ($85)

These are amazing pants.  Very light weight, almost like wearing shorts on a hot humid day.  They’ve got a tightly patterned series of holes in the fabric that further aids in breath-ability.

2: Icebreaker Compass Pant ($120 – Discontinued)

This pant had an interesting canvas feel that incorporated Icebreaker’s best known ingredient – merino wool.  These are nice pants with interesting material, but they are heavy to the point of being nearly the opposite of the UA Match Play.  Icebreaker doesn’t have similar pants for sale on their website anymore.  These pants were a little short given the size I ordered – the orange flare in the cuff is from where the tailor stretched out every last inch of material when I had them adjusted.

3: Banana Republic’s Slim Dark Rinse Japanese Traveler Jean ($120)

Blue Jeans aren’t regular office wear, but this pair from Banana Republic makes use of some interesting fabric.  The denim has an elastic feel and is made of a cotton, polyester, urethane blend.  They are surprisingly breathable while maintaining the tough outer feel of classic blue jeans.  These have been great for flights and long distance travel, and even come in large and tall sizes.

4: LuluLemon’s ABC Pant ($130) and Commission Pant (now Qwick Chino $130)

This was the first pair of ‘tactical’ office pants that I’d purchased.  They are very comfortable and more classy than the UA golf pants, as they’ve got a panel assembly with a piece of stitching right behind the calf.  The Commission Pant, now sold as the Qwick Chino, was an improvement on the ABC design, with classic lines and some interesting counter color accent work on the pockets.  These are another favorite for long flights and work travel, but the pricing puts them at a clear disadvantage to what Under Armour is able to provide.

Posted in Industry, Innovation, Uncategorized | Tagged , , , , , , ,

Under Bidding a Bridge to Nowhere


Bridge between North Korea and Dandong, China in disrepair following the Korean war. [Source: Huseyin’s flickr photostream, used under a creative commons license.]

If a customer isn’t 100% certain about the value of a product, then they’ll want to minimize their committed costs.  From an ROI standpoint, their R (the return) is uncertain and has risk.  To maximize their ROI, they will want to reduce their I (the investment) as much as possible.  This is a reasonable way to approach risk.


Each step in product development reduces customer adoption risk and increases the speed and ease of customer adoption.

When customers are behaving in such a way, and when competitors are able to enter the market at slight discounts to current pricing, then there is a gap between the value customers get from a product or process and what they need. The vendor is leaving risk for the customer to deal with, rather than fixing the product.  Rather than buying a fully formed project, they are having to buy a product that is not fully developed.  Using Crossing the Chasm terms, the ‘Whole Product’ is not yet fully developed.

Underbid: (in an auction or when seeking a contract) make a lower bid than (someone).

Bridge to nowhere: a bridge where one or both ends are broken or incomplete and does not lead anywhere.

Under-bridge: A lower bid made deliberately knowing that the resulting effort will be a bridge to nowhere.

The term is similar to:

Race to the bottom: Originally coined by US Supreme Court Justice Louis Brandeis, and defined more recently by  “The “race to the bottom” implies that the states compete with each other as each tries to underbid the others in lowering taxes, spending, regulation…so as to make itself more attractive to outside financial interests or unattractive to unwanted outsiders.”

Winner’s curse: The winner will tend to overpay.  Here in our example, the winner is the low bidder, who has mispriced their bid to the low side.  As opposed to a winner’s curse with an over-confident bidder and the sale going to the high bidder, here we have a sale that goes to the low bidder.  The low bidder will tend to have bad information about the true costs of the activity, similar to a high bidder having insufficient information about the value of the asset they are buying.

A losing scenario

These terms come together to compound customer and competitor behavior in new markets with high startup costs, high uncertainty and high risk.  The results are even more harmful in scenarios where the outcomes are binary – a project is either successful or a failure, with no gradient in between.

A knowledgeable vendor (“KV”) bids the work out at USD 100.  A new competitor can go in and state to a prospect, “this is much too high.  We can do this work for $50, and further, it will do much more than what KV says.  The KV technology does not work as well as ours.”

This creates a dilemma at the prospect.  They may have worked with KV and understand the capabilities and realities of the technology.  KV may have an order of magnitude more experience than their new competitor.  But how as a vendor can you be certain?  The cost to evaluate is high.  This diligence cost required of the prospect to know is very high.  KV must not only be able to demonstrate that what they do works, but also be able to show why the new competitor’s concept won’t work.

This trap is tough for the customer to avoid.  They don’t want to share with KV the value they see in the new technology.  They don’t want to tip their hat to the market.  They want to pursue their effort in secrecy to create a sustainable barrier to new competition and reap the rewards of their investment in this space.

Consequences & Innovation Death Spiral

The customer goes with the new vendor, thinking they will not only save $50, but also get access to a bigger market.  Two years later they find that they’ve spent $50 and have nothing to show.

How does that organization respond?

What do they do next?

Do they admit they were wrong and go back to KV?  Do they declare that, “we’ve spent 1/2 our budget, thank goodness we didn’t spend all of it!”  Given the binary nature of the project, they didn’t really learn anything.  There is no benefit of going to KV with the work as it stands, as there is nothing to build from.

What happens then is an innovation death spiral.  KV is the right answer, but with a slew of competitors constantly under-bidding them, and doing so on projects with a ‘bridge to nowhere’ there is no ability for the prospect to learn and move ahead.

The onus here lies mostly on KV.  KV must have a better answer for why they should be the vendor of choice.  The arguments must be so compelling that no competitor can enter the market behind them.  While the losses and pain may accrue at the prospect and the societal level, the source of the pain is with KV.

Posted in Disruption, Industry, Innovation, Invention, Marketing | Tagged , , , , , , ,

Scaling in Europe: An easy (8 year) plan

Disclaimer:  We sell industrial equipment, not software.  Also, we were spun out of a Czech university, so it wasn’t a ‘start-from-nothing’ type startup.

We scaled a startup out of Europe, specifically – out of the Czech Republic.  Our market is large, but it was not clear what market we were in when I was first recruited to the business in 2008.  Mr. Steemers’ post on, Why European Startups Fail to Scale, is certainly applicable in regards to the difficulties of approaching new markets, but there were a few big changes we would make if we could go back in time.

We would do the following, but do them sooner and do them more aggressively if scaling beyond your home territory is required.

1. Go where your customers and markets are.

In my last business we had commercialized a technology that was a spin out of the Microelectronics Center of North Carolina (MCNC, now NC Idea).  As we saw the semiconductor supply chain leaving the US (and realizing that it had already left the Carolinas) we opened our second wafer fab in Hsinchu Taiwan right near TSMC.  Amkor eventually bought us because our proximity had allowed us to iterate faster and gain key customers.

Our current business sells into the high end membrane and industrial rolled good market. This market is a bit of a trap – rolled goods, textiles and membranes can be made anywhere in the world.  (For anyone reading this, the odds are that a plant is within 100 km of you that you’ve never noticed.)  Since textiles and fiber businesses are everywhere, surely the business can get all the market feedback it needs and iterate while being located in Bohemia, right?

Unfortunately, no.  Thought leadership and product management for the types of customers we wanted to work with was in three locations, each of them very broad in their own right:

  1. Germany
  2. The US East Coast (from Atlanta to Boston)
  3. Parts of Asia (Japan, Taiwan, S. Korea)

A startup should only cross borders if it is essential to growth.  ROIs and plans should be carefully studied – there is never easy money when new geographies are pursued.  This business crossed borders because it had to.  The technology was too young, the market to spread out (and at the same time too consolidated), so in order to get access to the supply chain we had to look beyond our geography at the time.

Even if we are going to sell to customers all over the world, we owe it to them to be at the cutting edge of their industry.  We’ve got to have some visibility into the major market drivers – this visibility becomes more important in longer sales cycle, slower to move industries.  The penalty for failure is higher.

[Questions for Mr. Steemers – are these businesses moving around within Europe because their home markets aren’t big enough for what they do?  Are they moving into a new geography (ie from Belgium to Spain) once they have product market fit in their home territory?]

We also went in to these markets because despite our simple website and market message at the time, these customers came and found us.  We satisfied an urge they knew that they had, and even though we’ve come a long way, we were able to provide them with a product that met their needs despite our own challenges at the time.

The benefit from us having an office near a hotbed of membrane and technical fabric innovation is clear – a now deceased startup competitor was out of Texas that was unable to achieve scale, and it was our impression that our proximity to customers was a major advantage.

2. Do what the books say.

crossing-the-chasm-41czngtciql-_sx334_bo1204203200_Read Moore’s Crossing the Chasm.  Read Ries’s The Lean Startup.  Do what they say.

Almost every initial hypothesis the founders of the business had about the market was wrong.  There was insufficient understanding of the way our core technology worked and how customers would work with us.  It was not clear how to sell them the technology that we had, and it wasn’t clear how much work these customers would want to do on their own and how much they would require us to do for them.

As a team, we re-read parts of The Lean Startup and Crossing the Chasm as part of our bi-monthly management meetings.

It is painful every time.  “It is like we tried to do everything wrong.”

lean-startup-51vn15ycjyl-_sx329_bo1204203200_Neither of those books is available in Czech.  When I stared with the business, the Czech Republic was one of <10 countries where Google was not the top search engine.  Not only were we trying to help our team develop an understanding of the market, we didn’t have access to the right materials to help them get up to speed.

3. Find a partner and trust them.

I was the second person asked to lead our first international office (which was based in Raleigh, NC, USA) and the first non-Czech asked to take on a leadership role for global team members, and eventually our first non-Czech CEO.

That first US office lead had been a mentor of mine and had exited several companies.  He was thrown such hate, suspicion and anger that he finally walked away.  My plan had been to follow him, as the emotional environment was still very challenging.  However, he did a great job of helping the team understand what it was like on the receiving end of a poorly-framed partnership.

Our first US sale was closed before we had opened the office.  The Czech team, many of whom are our best global sales people, had done a great job.  However, when we had hired personnel who were both; (i) remote, and (ii) non-Czech, we had struggled with trust issues.  If you have a partner, treat them like a partner.

We’ve used this same philosophy to grow our presence through our partners all over the world, and especially in China.  Take that partner and vet them for their ability to put you in front of the right accounts, and then follow their feedback the same way you did when you were first looking for product market fit.

Need a different type of manual?  Do it.

Different expectations on training?  Warranty?  Service?  Do it.

Find a credible, knowledgeable partner and then treat them as such.  It helps customers work with you and it accelerates all the work you do across your business.

4. Know that everywhere (even within Europe) is different.

It has been many years since we’ve participated in a pure ‘startup’ type event, but it was clear at an early industrial technology VC event in Berlin that this was a very different world than what would be encountered in San Francisco or Sand Hill Road.  Mr. Steemers nails some of these differences.

The European nations are so different from each other that they had to create the EU, a super-Federal entity to force alignment down from above.  This indicates the very paradox of commercial activities between EU member states:

  1. Businesses in Europe know and expect a different type of market and customer when they go to another European country. [This is such an issue, that creation of entities to oversee this integration was core to the EU.]
  2. However, when European businesses go to a country outside of Europe, they are surprised at the differences, because there is no overhead EU governing body to state what can and must be done.

For our first pieces of machinery sold into Germany, our mechanical design and assembly teams would protest every change order saying, “No one in the Czech Republic has ever asked for that!”

Then when we started to sell into the US, China and Brazil, “No one in Europe has ever asked for that!”


Mr. Steemers nails it that some businesses fail to understand the changes when entering a new territory and/or market.  But that is a broad statement, almost as vague as, “They failed to scale because they did not sell enough.”

We are by no means an example of a smashing success.  We’re a small player who controls a niche market.  Hopefully the four lessons we’ve listed here will help others as they encounter similar problems and encourage more dialog about how to achieve product-market-fit and grow.

Posted in Business, Disruption, History | Tagged , , , , , , | 2 Comments