HUB Berkeley Fireside Chat on the Edge Between Nonprofit and for-Profits

July 28th, 2009

I attended a fascinating talk on social entrepreneurship at the brand new HUB Berkeley last night.  HUB is a shared workspace concept especially for socially innovative people.  They have facilities in 12 cities around the world, including the brand new, gorgeous David Brower Center in Berkeley, CA.  This event + last week’s Cleantech Open event at AutoDesk’s One Market gallery made for two LEED Platinum building visits for me in a week, which was a minor milestone for me.

The talk featured Matt Flannery from Kiva.org, Steve Newcomb from Virgance and Ben Rattray from Change.org.  Discussion was lively and instructive on a number of levels.  I was especially fascinated by the fact that all three businesses stand on the line between traditional nonprofits and for-profit businesses.  All three panelists spoke about why they chose one form over another.  If I understood them correctly, Kiva’s founders simply felt that non-profit status was the right fit; Virgance and Change.org both raised money from investors and that required them to use for-profit entities.

From the discussion, though, I got the impression that any of them could have gone either way with their businesses.  As Newcomb said, it is a great moment in history when people can be capitalists and activists at the same time.

The legal framework needed to build businesses at this balance point is not fully developed, but through the efforts of B corporation and others they are coming into shape quickly.  I love working in this space and look forward to its full development.

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The Selfish Side of 1% for the Planet

June 16th, 2008

My last post was a wonky one on changes in California law that affect company management’s ability to consider social good as well as shareholder value.  Here is a complementary piece to that, courtesy of Harvard Business School’s Working Knowledge newsletter.

Spending on Happiness — HBS Working Knowledge

The jist of the piece is that we spend our lives trying to accumulate money, but succeeding at that doesn’t make us any happier.  Instead, the researchers found that spending money on other people does increase happiness.

The article talks specifically about personal spending, but I am willing to bet that it holds true for companies as well.  Knowing that your company gives away money to help outside causes increases loyalty toward the business.

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Empathy With My Clients on My Second Anniversary

May 30th, 2008

June 1 marks the two year anniversary of starting my solo law practice. Recently a friend asked if it was what I expected, and it has taken me until now to think about how to really answer the question.

The answer is yes and no (you expected something different from a lawyer?).

Yes, the work itself is what I expected. I do more or less the same thing I did when I worked in larger law firms- a mix of (i) brand-new startups focused on getting off the ground and raising money and (ii) later-stage companies concerned with negotiating and signing revenue-generating deals as efficiently as possible.

The no has to do with the structure of the business itself. Working for yourself means wearing lots of hats.  The other day someone called and asked for the “billing department”, which interrupted the “maintenance department” in the process of changing a light bulb in my office, both of which stopped the lawyer from doing the actual work of my business- advising companies and negotiating transactions.

I knew that part intuitively, but experiencing it firsthand is totally different. I have advised startups and company founders for ten years now, and having been through the startup process myself I have a *far* deeper understanding of how hard it can be to juggle all the balls that need to stay in the air to keep a business running.

So to all my past and present founder clients- nice job keeping it all going, and keep up the good work!

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Two Great Videos from Someone Who Hates Video

May 21st, 2008

This post may serve to show that I am both (i) late to the party and (ii) inconsistent. When asked I will not hesitate to say that internet video bores me, and yet here I am posting two that I found terrific.

I am late to the party because the first one comes of out SXSW, a whole two months back. Apparently there was a spoof business plan competition panel there where people competed for the coveted prize of “worst website ever”. (Side note: I would have nominated AOL at basically any time since about 1994 and will vigorously defend that position, while acknowledging that it also cost me the chance to make a bunch of money in the 1990s.) The video is great because the guy spends five minutes explaining a business without ever actually saying what it does, and I’ve seen people do the same thing in real life too.

Merlin Mann’s Worst Website Pitch (the embed code for this isn’t working. Sorry.)

The second video comes courtesy of Brad Feld’s blog and lists numerous people who either failed miserably several times or were doomed to failure by teachers and others, and then went on to be extremely successful. It’s a useful reminder that life goes up and down- there is no linear path to success.[youtube Y6hz_s2XIAU]

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Social Entrepreneurship and Alphabet Soup Corporations

May 18th, 2008

There’s the C corporation that most people are familiar with (what you get if you don’t specify anything else) and the S corporation that is tax free but doesn’t allow preferred stock. Both of these names come from the sections of the IRS tax code that describes them.

Add now the B corporation. The “B” stands for “beneficial”. It doesn’t have special tax rules- instead the intent is to tell people clearly that the company considers benefit to its employees, the general public, the environment etc. along with shareholder profits.  The organizers have developed a community of B-corp adopters, and it includes a bunch of “green businesses” but also a couple of big law firms, a skateboard manufacturer and a handful of software companies.

The challenge of socially entrepreneurial companies is that they can do very well, get acquired or obtain outside capital and/or management, and the core principles can get diluted. The B corporation process doesn’t prevent this from happening, but it does make loud and clear that social good is a core element of the business.

So how does one become a B corporation? First, one must fill out a survey. A passing score means that one can take the next step of amending the corporation’s Bylaws and Articles of Incorporation to state the social purpose(s) clearly. I haven’t done it yet, but I am going to take the survey as it applies to my own business.  I hope I score well!

There is nothing magical about any of this.  It can all be changed or abandoned completely.  It is, though, a way to tell the world what your company cares about strongly.  That can be good for the company, good for business and- one hopes- good for the world.

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Finding Success in the Middle of the Market — HBS Working Knowledge

March 25th, 2008

Harvard Business School’s Working Knowledge newsletter is one of my favorite regular reads.  This recent article teases apart market segments in a smart way.

Finding Success in the Middle of the Market — HBS Working Knowledge

Per the article, most people tend to think of markets as a trade-off between the high-margin, low-volume top end and the low-cost high-volume structure at the other end.   

Author/professor John Quelch says that this ignores the substantial middle section of the market.  In the automotive world, he points out that this is where the Ford Taurus and Toyota Camry live- mainstays of each company’s product lines.

My question is- what is the best way to fill this market?  Ford is too old a company to be a meaningful example.  Toyota has moved upmarket from the high-volume end over the past 30 years but still has such a "value" imprimatur that it had to introduce Lexus as a new brand to capture the premium market.

If I have an idea for a company and would like to play in Prof. Quelch’s "midfield", am I better of starting with a premium product and gradually moving the price point down, or starting at the low end and working up?

Is controlling the midfield a reasonable goal at all, or does it require too much luck and carry to much risk of losing focus?  

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ESPN: The worldwide leader in selling ads solo? » VentureBeat

March 24th, 2008

Ads are the backbone of the Internet. Without them the “content is free” ethos would be entirely a lost cause. The ins and outs of who sells ads on the internet and who benefits from them is as important, therefore, as just about anything else out there.

VentureBeat discusses ESPN’s decision to stop using third-party ad networks, hire its own salespeople and bring in the advertising directly. As the world’s largest sports website, VB believes ESPN has the clout to pull it off.

ESPN: The worldwide leader in selling ads solo? » VentureBeat

I’m sure ESPN has its own salespeople for the cable portion of its business, so this is probably not breaking completely new ground.

However, here’s a thought about how it might get different. What if ESPN builds out its web-ad sales network really well? What if it then says to itself “hey, the content is free to consume but expensive to produce. Can we generate some extra revenue by placing ads on other sports networks as well? Maybe we’ll compete with ourselves a little for the pageviews, but if we get the right commission structure in place we’ll be just as well off.”

And then what if the New York Times has the same thought? They still have the cash to fund that kind of shift and they desperately need a new revenue model to replace paper subscription sales.

Is it too big a stretch to see the major news content producers turning into major ad networks? Maybe, but then again the 10% of my Sunday (paper) newspaper devoted to advertisements tells me maybe not. TV and print media have always been about wrapping ads around content in the best possible way. The Internet just makes it easier to sell ads around other people’s content as well.

Fun thought either way.

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What Needs to Go in My Business Plan?

March 21st, 2008

I have read many business plans from clients and friends over the years, and helped write more than a few. I have strong opinions about what works and what doesn’t and I have been mulling a post on the subject for a while.

As I started writing though, I found that lots of other bright people have also written extensively on this topic. More to the point, many of these people are VCs in the business of funding companies. Here, then, is a whole lotta link-love on the subject of business plans, with my own editorial comments.

*Purpose. Guy Kawasaki says that writing the plan is a really valuable exercise to “to solidify the objectives (what), strategies (how), and tactics (when, where, who)“. He also says (two lines prior) that it is a “mechanical step in due diligence”. Translation- no one is going to read the whole thing, so figure out how to make the important points stand out without being ostentatious about it. Use descriptive headings.

*Length. Around 10 pages is all you need. Guy says 11 and even allows an extra 9 for good measure. The best ones I have seen have all been concise. If you have trouble reducing the essence of your business to that amount of space you are too close to it. Get a friend who knows nothing about the idea to review it and tell her/him to cut out everything the tiniest bit extraneous.

*Executive Summary. The Woodside Fund allows 3-5 pages for this. Brad Burnham says 1-2. Guy says 1 and I agree with him. Remember that your audience may look at 10 of these every day. Hitting the major points so a reader can take them all in a single scan is a big help.

*Management Team. This is the hardest for most people, because new businesses are usually in new areas for the founders so their prior experience isn’t necessarily relevant. This is also the least-discussed area of the business plan by all of the VC blogs I researched for this post. Ask the VC cites the ability to build the product and ability to sell it as key attributes in founders. I’m willing to bet there are more exceptions to this rule than any other, though. I can name a half-dozen clients whose founders had vision and managerial/organizational skills, but no technical or sales experience per se. What is the secret then? I’d say it is to instill confidence in the audience that you can do what you say you will do. I hate to be so vague, but I really believe if you can convey that everything else will follow.

*The Business. Dick Costolo nails it- for web companies at least: “You do need to intimately understand where you sit in the proverbial value chain and what your position there means for your company, but you don’t need to know precisely how you will extract value.” You’ll be lucky to garner a $250M valuation while “starting to focus on making money” like Meebo, but a good idea can go a lot farther on the web than in many other places without a clear revenue stream.

This is really three sections in one: the problem (why people have been clamoring for your product without knowing it), the solution (why your product will satisfy the unrequited, unvoiced longing) and the business model (where you fit in the value chain, if not how to monetize). Give adequate attention to each part.

*Financials. Everyone wants to see them and everyone knows they are always dead wrong, so what to do? Ask the VC says that the user adoption piece of the projections is the most interesting, but it is the part most likely to be wrong and over which you have the least control. The answer is that the ideas that matter more than the actual numbers on the page. The financial projections convert the concepts in the business model through into cash terms. Don’t get hung up on whether growth will hit in month 19 or 27 because you will have very little control over that. Instead show that you understand your place in the value chain.

Other key points: one page of projections for a new business, shown monthly for 2-3 years, then quarterly through year 5. And don’t provide best/average/worst case projections. Work out a growth plan and be able to justify it.

*Flexibility and Adaptability. Or as Josh Kopelman says “your business plan is wrong”. You know everything is subject to change, as do your readers. State your plan confidently, but don’t get tied to it.

I realize I could continue almost endlessly on this topic. That’s enough for now, though. More later.

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News media needs to have consumers pay

March 17th, 2008

The headline here is direct from the SFGate.com article linked below.  It isn’t exactly a revelation, but the article has some interesting tidbits- such as that print journalists are figuring out how to create audio and video news items, but the advertising departments haven’t caught up as quickly.

News media needs to have consumers pay

It is possible that I am part of the problem here.  I ignore the ads on all the sites I visit as a matter of habit- i probably click on 1 in 1,000 or less.

I suspect most people are similar, which leads to the conclusion that new ad/revenue models are needed.  But what should they look like?  Hmm, I guess there’s a reason the advertising departments haven’t moved as quickly as the newspeople.

Or to paraphrase something my friend Chris said recently "content is pretty easy to develop, but revenue is fricking hard to come by". 

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Mini Case-Study on the Emperors’ VIP Club

March 12th, 2008

Bloomberg has a min-study gleaned from FBI transcipts on what made the Emperors’ VIP club successful.  It’s an entertaining read.  Highlights include:

*Strict payment policies and careful training on credit card imprints

*Clever marketing of its clients as wealthy/powerful men

*Market analysis of different regions (the Miami and LA high-end prostitute markets are apparently flooded)

*"Buy out" option to cut out the broker in the case of long-term relationships 

Bloomberg.com: Opinion

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