How cool is your ride?

Even though I’m getting older I still like to think of myself as at least a little bit cool (although I’m sure there are many people who would set me straight on that one). As a result I was a bit dismayed this weekend to read an amusing article in the Times that clued me in that – at least in my choice of cars – I was not as cool as I thought I was. In fact, the Land Rover that I drive is pretty close to the “Stodgy” end of the cool meeter and in the same category as Chrysler and (gasp!) Oldsmobile. As the kids would say these days: “Not so groovy!”

July 6, 2005· 1 min read

TSA in action

i can’t tell you how much safer i’m feeling now. i’m writing this on a flight from denver to chicago (on my danger sidekick, by the way). i almost inadvertantly took aboard an allen wrench set (in my bag from when i rode my bike to work last week and perhaps the most blunt object in my bag). the fact that i somehow got it with me to chicago in the first place aside, i know i’m much safer now that its been confiscated (apparently under the ‘tools’ clause of the tsa’s list of banned items). if not, right now, someone could have taken the set and be using it to LITERALLY dismantle the plane. . . …

July 5, 2005· 1 min read

Networking 101 Expanded

Josh Kerbel wrote me with a good question to my Networking 101 post and my follow up post to that one Here’s how you do it that I thought I’d post along with my response (with his permission). Josh Writes: A while back you wrote a post about networking and you referenced Ben Casnocha as an example of a great network, the type of guy who writes people letters and goes out and meets them. …

July 5, 2005· 4 min read

Gnomdex Redux – As if you where there

Sorry – meant to have this one up a little more proximate to the actual event . . . You go to Gnomdex? Me neither. I was bummed I missed it, so I spent some time rummaging around on Google and Technorati looking for some links. Here’s a few that I found that, while they don’t replace the experience of attending in person, at least give you a little bit of the flavor. …

July 4, 2005· 1 min read

Wouldn’t it be great . . .

Wouldn’t it be great if you could subscribe to the comments of certain blogs (or better yet, to certain posts) in your reader? I’m going to add it to my wish list (we’re actively working through these sorts of ideas at both Newsgator and Feedburner). I must have reached some kind of critical mass in my readership where I’m actually getting a reasonable number of comments and trackbacks to my posts. It got me to look at the comments to some of the other blogs that I read (I rarely visit sites directly – rather I read them in Newsgator). Turns out that there are great comments out there that I’m completely missing. The solution for the moment is to click through on posts that I particularly like or think will be well commented to and see what’s posted, but wouldn’t it be great to be able to subscribe to these and read them directly in your reader. In an ideal world you could subscribe to comments for only those posts that you care to see feedback on. Yup – that would be pretty cool . . .

June 23, 2005· 1 min read

M&A – A Corporate Development Perspective

I recently asked my friend Daniel Benel if he’d consider contributing to my M&A series. Daniel was a banker with Lehman Brothers (in NY and Tel Aviv) an is now a corporate development exec at Verint Systems (NASDAQ: VRNT). Despite having never bought one of my companies, he’s a great guy with a smart corporate development mind (rim shot). I thought he could add a corporate development perspective to the series. I’ll make sure he gets copies of any comments that get sent back, or feel free to reach him at the hyperlink attached to his name above.______________ Below are three topics on my mind related to acquisitions from a corporate development perspective (perhaps the beginning of a series): The Hockey Stick Projections – Hockey Stick Financial Projections did not die with the bubble’s burst. Perhaps they were put away in the back of the garage for a while alongside other unloved sporting equipment like that confusing lawn bowling set or the ambitious NordicTrack. Unfortunately, some mischievous banker found the darn things, had them shined up and sent out to technology companies near and far. It is more likely than not nowadays, when I receive a book from a banker selling a technology company, that the financial projections show jaw-dropping out-year growth. The most noted reason for the turbocharged numbers: The Market. The Market is hitting a “sweet spot,” or the company is in a sweet spot and the market is about to develop a sweet tooth. These saccharine solution sellers expect, of course, to be valued off of forward numbers. My common response to wild growth projections is to advise the company not to sell. If management of a selling company believes that they can accelerate growth dramatically over the next 12 months, why don’t they prove the business plan and come back to the merger market with a significantly higher value? At this point in a discussion some sellers choose to revise their outlook. Other sellers claim that the projections are based on “what the company can do on a pro forma basis,” that is, when combined with “your more significant resources.” (I’ll discuss that in the “We Don’t Pay for Synergies” section.) Companies whose sales are truly going to accelerate dramatically, and are selling for a defendable reason, need to back up projections early on with a real sales pipeline/backlog (not a Frost & Sullivan report). Sharing pipeline/backlog data will immediately trigger competitive concerns in the mind of the seller, which is fair and will be discussed further in the “Overboard Competitive Concerns” section. We Don’t Pay For Synergies – Often stated as an acquisition truism, but not always true. In general, it is synergy that motivates an acquirer’s interest in a given target to begin with and not something for which a buyer is willing to pay extra. Synergy is a value that the transaction itself generates and is not produced by a company on a standalone basis. Depending on the transaction, each side may lay philosophical claim to a greater share of this value, but this debate will not affect the standalone valuation an enterprise can demand and is usually a losing negotiation point anyway. That being said, the more synergy a given business combination offers to a buyer, the more that acquirer is able to pay for a business. While an acquirer may not admit to paying for synergies, in a competitive acquisition process, the acquirer with the most significant synergies (all things being equal) could write the bigger check. Sellers should negotiate accordingly with this knowledge in hand. Overboard Competitive Concerns – Acquisitions often occur between competitors. This is natural, particularly in early stage markets that are in a consolidation phase. It is important to recognize that the time it takes to sell a company is correlated to the speed of information sharing. I am not referring in this case to the relationship-building phase that can take months or years, but rather to the moment in a transaction when there is a meeting of the minds between seller and buyer and perhaps a non-bindingMemorandum of Understanding (or other term of art) in place. At this precarious juncture, just when you are tempted to think that some of the hard work has been done and you can put your Blackberry down for the night, sellers can become frozen with fear that all of their competitive secrets will be stolen during the diligence process and somehow abused. Sometimes this happens when they receive a buyer’s diligence request list and it is longer than the federal budget. Sellers must recognize early on that they will have to accept the risk of sharing sensitive competitive information with potential acquirers in order to get a deal done. Some data, though, may be deemed so sensitive that particular work arounds need be put in place in order to make diligence acceptable for both sides. Sometimes a two-stage approach to diligence (deferring highly sensitive material to when the deal feels more certain) can resolve concerns. In this case, it is important to first determine how critical a particular piece of sensitive data is to the buyer’s diligence process. It may be, for example, that the seller believes his source code is something that can’t be revealed to a buyer early in diligence and he therefore stymies a process, when in reality the acquirer might be far more interested upfront in a customer list than in source code (and would be willing to delay source code review to just before signing). …

June 22, 2005· 5 min read

Bike to work day

Today is bike to work day in Boulder. I’ve been meaning to ride my bike into work for a while, so today seemed like a good day to start. Biketoworkday_1 Here are a couple of observations from the road: – Riding in is a fantastic way to start the day. I got to work and felt great. I was completely energized and awake after my roughly 15 mile ride in.- Leave your computer at home. I forgot to do this last night and as a result had to lug my laptop on my back (along with a change of clothes, which would have also been a good thing to have brought into the office the day before my ride). What didn’t feel all that heavy in mile one felt like a ton by mile ten . . . – I live in the sticks. I didn’t realize how many miles of farmland I actually pass on my way to work. Zooming by at 60mph most mornings it fails to register with me. Riding at a more moderate 15 or 20mph I got to take it all in.- God – Colorado is beautiful. For about 8 or 9 miles of my ride I was riding with unobstructed views of the rockies, including Longs Peak – Bike lanes are everywhere here. I probably only rode about a mile this morning that wasn’t in a bike lane – excellent! …

June 22, 2005· 2 min read

Thinking of taking venture capital? Don’t!

Here’s a thought for those of you considering taking venture capital – don’t do it. Seriously. It’s not worth it. Ok – so I’m not 100% serious. I’m trying to make a living investing in companies and would therefore be out of business if everyone followed this advice, however I think that for the majority (50%? . . . 80%?) of entrepreneurs taking venture capital money is a mistake. As I explain why this is the case, please read from the perspective of someone who is actually trying to encourage people to go into the process with their eyes open more so than I’m truly trying to scare people off from raising venture money. The worst thing you can do when you take venture capital is to go into the relationship with a misunderstanding of what each party expects – an example of that in a minute. …

June 21, 2005· 5 min read

Here’s how you do it

I got a great postcard today from Ben Casnocha. It said: Yay, summer has come Business, reading, deep thinking Time to change the world I LIKE YOU! Ben understands networking. He’s thoughtful. He posts comments to blogs that are relevant and interesting. He sends private e-mails in response to things he reads. He forwards articles of interest that are targeted to the people he interacts with. He clearly thinks networking is a priority and does it well. …

June 13, 2005· 1 min read

Your Exit

Here’s an interesting stat from a M&A update I received in my inbox a few days ago: Since 2000, the ratio of technology companies sold vs. going public is 10:1 (1,300 m&a deals vs just 125 IPOs). The moral of the story – be realistic. If you run a software company you are WAY more likely to sell your business than to go public. Time to start planning . . . now.

June 13, 2005· 1 min read