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June 23, 2009

AT&T - Good customer service

Taking a brief break from my Japan trip to give some kudos to AT&T Mobility's customer service.  I'm using an AT&T PDA (Blackjack II) as my phone and wireless data device on this trip.  I did know that international roaming was expensive, and I have been trying to not use it too much to keep the costs down.

This morning I got both a text and an email from AT&T telling me that I could save money if I called them and changed my international calling plan.  I called the number (a free international call from my phone) and learned that I could switch to an international calling and data plan which would save money over what I had already spent on international calls and data.  So, they let me change and backdated the change to the start of my billing cycle, giving themselves a revenue cut over my ad hoc usage.  And, they said I could call when I returned to the US and turn off the service (which has a fixed monthly cost).

I was impressed that they proactively contacted me as soon as I had spent enough money to justify adding the international plan.  And, they backdated the plan change to minimize my costs.  All while knowing that I plan to turn this off as soon as I return to the US when my international data and calling goes away.  Very nice customer service.

Even nicer, my call to them dropped in the middle of the transaction (the vagaries of international roaming -- the call was dropped by the local Japanes carrier).  They called me back a few minutes later to confirm that everything was all set.

The credit card companies could take a lesson from this.  Rather than taking advantage of a customer's inadvertant misuse of their current plan, they proactively contacted me to get me onto a plan that they offered that minimized my costs.  I'll be loyal to AT&T for this!

June 18, 2009

Good-bye for now


If Google is correct, that's Japanese for good-bye for now.  Heading to Tokyo for vacation.  Track our trip at Japan-demonium.

June 16, 2009

TED Talk on Social Media

Here is a great talk from Clay Shirky about social media from a recent TED Conference.  He explains very clearly how media is changing to incorporate social media (blogging, cell phones, Twitter, open communities) and the impact on publishing, advertising, and politics.  Very appropriate with the protests going on in Iran right now, too.


June 14, 2009

Upcoming trip to Japan

My daughter and I are leaving soon for a two week vacation in Japan.  Follow our exploits on our Japan-demonium blog.  If you like RSS, here's the RSS feed for Japan-demonium.

June 10, 2009

VC discipline

I've written many times about the size of the VC industry.  There is lots of data to show that the returns don't justify the current size of the industry.  Too much capital in the hands of VCs have led to companies being overfunded, which lowers the returns.

The latest data set comes from Paul Kedrosky of the Kauffman Foundation.  Paul confirms some of the thoughts above, and postulates that the core business that has driven venture capital, information technology, may have matured too much to justify so much VC investment going forward.  New sectors need to be exploited.  Perhaps clean energy is one of them.  The challenge is that the investment models in new sectors are not was well known, and there will invevitably be some trial-and-error until it is figured out.

PEHub wrote about this today, with an interesting example.  They used the comparison of three companies in the same space to illustrate what happens when a niche gets overfunded.

[Note that my former firm, Venrock, was an investor in Vontu (but in a fund that was invested before my time there).]

PEHub suggests that the Vontu syndicate did well and, therefore, the other two companies shouldn't have been funded.  But, the real problem in this chart isn't the existence of the other two companies but the amount of capital poured into them.  Obviously, Vontu could justify significant investment given the size of the outcome.  If somehow they could have gotten there with less capital, everyone would have done even better.

But, the other two companies were way overfunded.  They were all probably optimistic at the start of the investment.  Perhaps they had to keep up with Vontu.  But, the VCs who kept putting money into those companies were only focused on trying to get a big win and not protecting their downside.  I don't know anything about the operations of these other two companies, but you almost always know that you aren't heading for a big outcome long before it happens.  If the VCs had the discipline to turn off the flow of capital and push the company to an exit, they may have done better in the case of Reconnex and could have limited their losses in the case of Tablus.

It's the lack of discipline in the business that is causing the problems.  VCs have big funds which generate big fees.  Therefore, they are motivated to deploy large amounts of capital in hopes for a big win (with little regard for the losses).  And, in the Don Valentine quote in the PEHub article,

Don Valentine asked his limited partners why they invested in other venture firms they knew were unlikely to make money and came back with a candid assessment, recorded in the book Done Deals: “They think it’s fun.”

I don't think that LPs think it's "fun" now to over-invest in venture capital due to the low returns this decade.  Maybe, with the fun now over, some discipline will return.  And, LPs will also start to look for some more innovative models as ways to make some money.

The last thing that has to happen is for VC compensation to get more aligned with their investors making money.  The 2% fee and 20% carry model can provide too much current income for VCs with little regard to capital loss.  That doesn't work for LPs except for well-established funds that have a high likelihood of doing well.  In addition to looking for some unique investment strategies, LPs should also look for some innovative compensation models from their venture funds that align everyone's interests more directly.

June 08, 2009

How much rope?


Whether you are a manager, Board member, Advisor, or a parent, you always wrestle with the question of how much rope to give someone when they are making decisions?  Do you keep them on a tight leash, or give them enough to hang themselves?

As a manager, where you own direct responsibility for the outcome, you can justify a tighter leash.  You want to encourage the people on your team to take risks.  Failure is the best way to learn, and most people fail before they succeed.  But, if failure has a big consequence, or your own success depends on the success of the people you manage in this instance, you may want to closely monitor what is going on and keep them on course.  Let the innovations be their idea, but don't let them drive into the ditch.

In a situation where you don't have such direct managerial responsibility, this is a tougher question.  As a Board member or Advisor to a company, you can't jump in an run things, unless you are explicitly asked.  The company needs to stand on its own, and the company's management needs to make the final decisions.  You can give input, make suggestions, and provide strong debate, but you can't overrule the team.  About all I ask for in these instances is that they listen to me (if they don't want to do that, why have you as an advisor?).  If I'm heard, it doesn't matter as much if I'm heeded.  In fact, as a Board member, I prefer that management make their own decisions.  Then they can be held accountable if their decisions are wrong.

If you are an advisor or Board member and act very heavy-handed, you can probably convince management to do things your way.  But, you'd better be right.  If things don't work out when you have 'overruled' management, you can't really hold them accountable.  The dynamic I prefer is to start off trusting management's judgment.  If they do something I don't agree with, and it works out, then I've learned something.  If it doesn't work out, I lose some faith in their judgment.  If it happens a few times, then maybe the company needs new management.

Your approach also haas to be moderated depending on what the stakes are.  If the company is going to go over the cliff and its survival is threatened, then maybe a heavy handed approach is required.  And, replace the management for almost taking the company down with them!  But, most decisions don't have that level of impact.  You need to let the people closest to the situation make the decisions, and then measure them accordingly.

As my kids have grown up, I see parallels with parenting.  Every kid is different than their parents, and they make their own choices about how hard to work in school, pursuing job opportunities, and taking part in extra activities.  You can't make your kids act the way you would.  Just try to get them to listen to you and learn from your experience.  That can be a big enough challenge sometimes!  But, if they make a few mistakes and learn from them, they'll have a stronger foundation on which to succeed in the future.

June 02, 2009

June is New England Innovation Month

June 2009 is New England Innovation Month.  Of course, I think every month should be Innovation Month.  But, this month there is a real focus on networking and connecting with other entrepreneurs as a way to focus on what's possible in this economy rather than wallow in the negativity of what's happened.  And, there is a list of great innovation-related events on the New England Innovation website.  One of the best ways to find something innovative to do is to network with others who are looking to do the same.

Many of the events on the list are free, so get yourself out there and support innovative ideas in New England.  Maybe I'll see you there!

June 01, 2009

Nothing Like Building Stuff

Today, Boston-Power announced that it plans to build a state-of-the art battery manufacturing facility in Auburn, MA, near Worcester.

Like many companies these days, Boston-Power has applied to the federal government for a grant of about $100M to help build the factory.  The facility would be used to build a new product, Swing, to be used in hybrid electric vehicles.  If the federal government is going to spend money to subsidize industry, this is the type of thing the taxpayers should be funding.

First of all, we need new batteries to power hybrid electrc vehicles.  These vehicles lower our dependence on imported oil.  And, we need to build these batteries in the US to be close to US manufacturer supply chains.  Also, we can export these batteries to international manufacturers.  Lastly, Boston Power plans to hire 600 people at a factory in central Massachusetts where new jobs are generally lacking.  Getting good jobs building stuff is a key to our economy.

We need to continue to develop new technology that we can manufacture here and export elsewhere.  It's so much harder to solve our employment problems with service jobs, which generally are lower paying.  Instead, our economy needs to find high-margin, innovative products that we can build here.

One key part of building them here is that the rest of the supply chain needs to be here.  Boston-Power also manufactures laptop batteries, including supplying batteries for the HP Enviro Battery.  But, these batteries are manufactured in Asia to be close to the rest of the laptop supply chain.  Even if we could build laptop batteries more cheaply in the US than in Asia, you'd lose money shipping the batteries from the US to where the laptops are built.

Let's hope Boston Power is awarded these grants so that we can start to build more high-tech stuff in the US (and Massachusetts).

Disclaimer: I was a board member of Boston-Power for several years and am currently an advisor to the company.

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