Wednesday, November 28, 2007

Skin getting thicker or thinner ?

I continually see an Entrepreneur's/CEO's skin get thicker as they navigate the trials and tribulations of a growth company. Determination, a sense of responsibility to shareholders and faith in themselves keeps them going strong.

Surprisingly, I also see the start-up company employee's skin get thinner as the company goes through the above process. Employees can fatigue, become disillusioned with the potential, and balance of risk and reward.

These realities are often a surprise, even hurtful to the CEO who thought he was on the same page as all of the troops.

Your troops need one on one reassurance and reinforcements. Their upside and downside is different than yours.

Check in often.

Dan MacDonald

Saturday, November 24, 2007

What are you waiting for ?

What are you waiting for ?
What is the worst that could happen ?
The only way to never to make mistakes, is to do nothing.
Go for it.

Dan MacDonald

Wednesday, November 21, 2007

Relevancy

Know your customer.

Whether internal or external, accumulate and maintain a deep knowledge of your customers needs, desires, business problems and sensitivities.

Customers are only to happy to share, if you genuinely ask.

This knowledge will benefit you and your organization in numerous ways, the most important being “ensuring your relevancy”.

Dan MacDonald

Start-up Company - Board of Directors

Start-up Company - Board of Directors

Start-up organizations typically look to surround themselves with trusted advisors who can offer business wisdom, open doors, share industry knowledge, and or help raise funds. These advisors are a group of people who are tapped when required and have no real fiduciary responsibility to the company. An advisory board is an important element of successful companies.

As a start-up company evolves and attracts investment, it becomes very important for the organization to form a proper board of directors. It is the responsibility of this board to ensure the overall integrity of the company.

Boards of Directors and Advisory Boards are completely different in function, accountability, and decision making power.

The following excerpt from an article in Inc. magazine provides some tips well worth considering:

Choosing a Board Seek out people who have experience dealing with the growth transitions you anticipate for your company. If you look around the boardroom and none of your directors has ever managed a company bigger than yours, then you have a problem. You need only one person with specific experience in your industry.

After that, pick people who have managed businesses through various stages of development. Try to imagine how each candidate might handle a swing vote situation. Avoid choosing members who seem unwilling to bend every now and then.

Anticipate who might cause fights. Above all, steer clear of bullies and loudmouths. Make changes. As your company evolves, so should your board. From the outset, let members know that you intend, from time to time, to appoint new people with different connections, market knowledge, and strategic experience.

You have a board. Now manage it. Like any group of people within your company, your board members need direction and even encouragement. They also need to be kept informed.

The rest of the article provides additional practical advice on this important topic. http://www.inc.com/guides/growth/20672.html

As start-up companies seek more significant rounds of financing, attracting larger institutional investors, the terms of these investments often stipulate that the investor have a seat at the board.

It is important to strategically consider the current and most likely future state board of directors. Do you have a credible, seasoned, strong board chair ? If the current board chair is the CEO, this will need (in most instances) to change.

A start-up company in the need of investment, is rarely in a position to push back on such a condition and trusts that the designated board member will be generally good for the company. After all the new investor will want to protect their investment. While this is likely true, there are situations where the institutional investor designates a board member who is not an ideal board candidate.

In extreme cases, the designate is a person who is NOT constructive, balanced, experienced, or at all compatible with the rest of the board. Nothing wrong with a different point of view, but in these extreme cases the new board member(s) can have significant negative impact on the company.

Start-up companies who are negotiating investments and who will need to give a board seat to the investing organization should proactively discuss with the investing organization the type of board member who could add significant value to the company. This discussion will sensitize the organization to the fact that the start-up looks to ensure that the board member assigned adds value not the other way around. Ideally, in the right context, the investor will discuss the type of person they would like to see represent them. The two way dialog can be an opportunity for the start-up company CEO and or Chairman to influence the end result.

Not having this conversation sends an entirely different signal and creates unnecessary risk.

This simple but critically important approach, will be seen as strategic by the investor and help prevent some major headaches down the road.

Dan MacDonald

Sunday, November 18, 2007

Seed and Early Stage Investing

At a recent Canadian Venture Capital Association (CVCA) conference, a panel I moderated debated "Seed and Early Stage Investing". The panel brought together perspectives from active and highly regarded US, Europe, and Canadian venture capital firms. While the panel did not agree on all topics, here are the common themes from debate.

When considering Seed and Early Stage Investing, institutional investors;

1. Target to acquire at least 20%-25% equity in the target company, so as to survive dilution of follow on rounds.

2. Immediately after the close of the seed/early stage investment round, begin to position the target company for a follow on round of investment with appropriate VC's. As they say "raise money long before you desperately need it".

3. The strength of the management team is as important as the strength of the IP. Prior to the seed/early stage round closure, an investor must ensure expectations and logic for future management team makeup change are clear. Changing the CEO for example is a 3 to 6 month journey from recruit to effective. A very tough thing to do while building value, positioning for follow on rounds, etc."

4. Strategically considering the most probable and profitable "exit" paths for a given target investment begins prior to the seed/early stage round and throughout the target companies life cycle. Management must be able to build real value in the company which enhances the likely hood of a profitable exit. Strategic decisions made throughout the companies life cycle must always consider which decision enhances the companies value to potential acquirers.

What do you think of these themes ?
Agree ?
Disagree?
Why ?

Dan MacDonald

Saturday, November 17, 2007

East Coast Connected

The East Coast Connected (ECC) initiative.

Having taken a closer look and meeting a couple of times with the founders of ECC, I have become a big fan.

Bottom line.

As you probably know first hand, when someone from the east coast (or from anywhere) has “moved away”, it is virtually impossible to have any meaningful connection with the business community back home.

One can read the local paper on line, visit various web sites which are typically static, chat with friends and family every week or so, but the result of this scenario is that expatriates lose and or are unable to develop business connections back home.

This lessens the likely hood of them reintegrating in the future, and doesn't it allow the local business community to tap the collective wisdom and connections of these folks.

East Coast Connected (ECC)

ECC, while not a silver bullet, sets out to provide connectivity between those here in the business community and those who are away. The connectivity can be as simple as providing a forum to keep up to date, but more importantly can enable business connections, mentoring opportunities, career opportunities, etc.

What I especially appreciate about ECC is the fact that the concept has grown on Facebook from 0 to 1500 + members in only a couple of months. The multi city launch on November 7th, brought together interested folks of all ages, but mostly the 20 and 30 somethings.

The business community can really benefit from associating themselves with ECC. Access to expatriate talent who, by the fact that they have joined ECC, are at least open to opportunities back in their home areas.


Check it out at:

http://www.eastcoastconnected.ca/
or
on Facebook Group: East Coast Connected

Dan MacDonald

"Walk with a swagger"

Welcome to "Walk with a swagger".

Throughout my career I have worked with some fantastic people from around the world. The most all around successful people I have met are confident people. Not over confident, but confident.

A colleague of mine once said, “You have to understand the situation at hand, come to terms with it, and move confidently forward. You have to walk with a swagger.” While a little hokey at first glance, I believe there is an important piece of advice here for all of us.

Rather than getting bogged down or frozen because you are up against a complex situation, you must come to terms with it and move forward. I see people at all levels allowing them selves to get in a rut for far too long, creating lots of motion but little progress.

One has to use ones expertise, network, and courage to choose a path and move forward. If you find the path is wrong, then recalibrate and keep moving. Walk with a swagger, you’ll like how it feels.

Dan MacDonald