More with Less

Lever_(PSF)Building a company from the bottom up is an interesting journey.  At each rung of the ladder you raise a bit more money, hire a few more employees, and hit a few more milestones.   In the early days especially you have to place really tough bets.  By definition you don’t know if those bets are going to pay off, and the difference between winners and losers in the company building game are how many bets win, and how many lose – the company that wastes the least amount of their resources on their way to profitability, wins.

It’s ironic then that we use number of employees or the amount of capital raised as a measure of how successful we’ve become.  Sure it’s a proxy for progress I guess.  But if you really start to think about it, the number of employees or the amount of paid-in capital are the denominators of what really shows how successful a company is or can be, especially in the tech-driven world of high-growth, venture-backed, hair-on-fire, company building.

Operating leverage ought to be central to the metrics we pound our chests about.

A couple years ago I gave our ops & tech team a simple goal: As we scale the network beyond a billion transactions per day, I want to see the amount of money (fully loaded – meaning people and all) spen t to serve an impression decrease.  That’s hard to do.  Especially when you consider the sheer size; increased complexity; international footprint; need to monitor 24×7; collect, store and manage the data; etc. etc. Other metrics like this include:

  • Revenue per employee
  • Pageviews per employee
  • Costs per revenue dollar
  • Revenue managed per sales person

All investors value growth, obviously.  Smart investors value growth and operating leverage.

Get paid to have fun

Building a business is hard.  Mostly its hard because of the known and unknown unknowns of the environment in which you’re building.  The more I do this, the more I’m convinced that the separation between a thriving and growing business and one that’s sideways or declining comes down to one thing.

Its too simplistic and way overused to just say "the people" without definition of what that really means.  Of course every entrepreneur, VC, board member, or business pundit says its all about the people.  Of course having smart and self-starters on the team is critical.  Its more than that. 

Its about how those smart and self-starting people act, behave, engage, and carry with them the "why" of what they’re doing when the leaders aren’t around.  Its the religion driving the effort that tips the scales.  Its the sense people have of working together to solve interesting things,  having a blast doing it, in pursuit of an emotional reason for doing it.

I think and talk about the business nearly 24×7.  I even dream about the business.  Its not the mechanical  bullshit, its the really interesting, cool, fun, and stimulating things that I think about.  If the people around me do the same and in the same causal direction, then and only then do we have a shot on goal of real success.  Win or lose, we’re going to have fun doing it and I like getting paid to have fun.

Its not the leaders or managers that create, build and grow something – we just get the lion’s share of the credit.  Instead its the people.. all the people inside the company that do extraordinary things with their personal and discretionary time.  The leader’s role is to create an environment for success.  Execution is where the battle is won or lost and the best leaders make execution a derivative of the cause of the business.

Markets move, that’s what opens opportunity.  Successful businesses exploit gaps, needs, holes, fragmentation and inefficiencies.  They prey on weaker competitors that don’t or can’t rally their people to do things that can’t be legislated.  They deconstruct and cause other businesses to fail.  Markets are unpredictable which only adds to the suspense and further makes innate agility and execution a requirement to win.

Bigger. Way Bigger.

On Tuesday this week we announced that Lijit had been acquired by Federated Media.  Todd and I have gotten to know Deanna Brown, John Battelle and the rest of the team there over the past couple of years.  There simply couldn’t be a better strategic and market fit between the two organizations.


The past year being at Lijit has been like riding a rocket.  This time last year we hit on the economic model that clicked.  Revenue began growing month over month from $80K to $175K to $350K to $500K – and we never looked back.  The past few months we kicked it up another gear and saw our first $1M month.  The $1M month faded into our rear-view mirror as we blew through that one month and then promptly grew another 40% the next.  October just began and we’re already hitting all time records with more than 200M uniques and 70,000+ websites across the network.  The ride was just getting to be really really fun.

This deal has the potential to be even bigger – way bigger.

The FM folks are the best of the best when it comes to online media.  Widely known as innovators and thought-leaders in “the independent web” – they harness the best content the web has to offer and then they use innovative and conversational media techniques to connect engaged consumers with top brand marketers.  Lijit helps publishers of all shapes and sizes engage, understand, and profit from their work.  Together the two companies have a complete “stack” that helps publishers do what they do best – and – enables marketers to connect with consumers in authentic and meaningful ways.

I joined Lijit 4 years ago when it was still about 10 people, engineers mostly.  Over these past 4 years, we’ve assembled one of the best management teams I’ve ever had the pleasure of working with.  Manny, Perry, Sonya, Tom, Mark – all of them are passionate, smart, and 100% committed to building an incredible company.  I should be so lucky as to work with people like that!  Our investors have been first class, Foundry Group, Boulder Ventures, High Country, and Highway 12.  What an all around great group to work with.

The press today on the deal has been outstanding.  I love how Lijit’s lead investor Seth Levine put it:

    “While ultimately the exit will be measured by the outcome of the combined Lijit/Federated business, based just on this deal’s value alone this ranks as one of the larger transactions for a Denver or Boulder based business in the last decade.”

Agree with Seth – lots of work still to do and the ultimate outcome is still a ways away.  I’m really excited to get on with the next chapter.

Some of the stories from Tuesday:

  1.  Todd Vernon blog post
  2.  John Battelle blog post
  3.  FM press release
  4.  AllThingsD
  5.  Adotas
  6.  VentureBeat
  7.  DigitalMediaWire
  8.  TheNextWeb
  9.  PaidContent
  10.  eContent
  11.  Vator News
  12.  ClickZ
  13.  Business Insider
  14.  Boulder County Business Report
  15.  BlogWorld
  16.  McClatchy-Tribune Information Services
  17.  Inquisitr
  18.  Pulse2
  19.  Daily Camera
  20.  Denver Biz Journal
  21.  TechRockies
  22. Q&A in AdExchanger
  23. Denver Post
  24. Research Magazine
  25. AdBalance
  26. SilconAngle

Content drives Intent

We form the decision-making process during and around the act of consuming content.  We seek, or stumble, into information that interests us. We dig deeper because we’re engaged by the content.  Its authenticity, opinion, or perhaps even its entertainment value is what grabs us.  We discover and then we begin moving towards a decision.

Check out the full copy of my post on Marketing Pilgrim.


Recently I’ve been thinking about what creates multiples of value in a business.  In other words, why one company is more valuable than another company even if they each have the same revenue and same growth rates.  Obviously revenue and growth are the big dogs that drive value, but I’ve been thinking about what multiplies that revenue and growth when it comes to valuation.  One concept I’ve been kicking around is the notion of optionality.

All of the more successful companies I can think of have created something that extends and amplifies thier core business with options of what they can offer their customers.  This isn’t the same thing as the core value they offer customers, but rather the options their core created by developing that core value in a way that’s extensible.

A couple of examples:

1. Wells Fargo

It could be any bank, but my wife and I happen to use Wells Fargo for most of our day to day banking.  WF made a connection with me by having a local branch office and pretty decent customer service.  I don’t go into the branch much anymore, but the options I consume from them are increasing.  Once the customer connection is made, they now have the ability to offer me mortgages, car financing, stock trading, retirement accounts, financial planning services, etc. 

2. Comcast

Pipes.  That’s mostly what they have.  I have 1 pipe  into my house now which has phone, internet, and TV.  TV isn’t exaclty a fair description, because its really access to what used to be just broadcast, then cable, then premium cable, and now OnDemand, movies, a DVR, an iPad app, etc.  They laid the groundwork and now they have the optionality in their business to layer on more services and products.

3. Apple

Obviously they make MP3 players, laptops, desktops, phones and tablets.  But the creation of the App Store/iTunes is the optionality magic.  They now can give me options to buy music, video, books, applications.  They have my credit card on file in the App Store and I can consume until I couldn’t eat another bite. Now they’re threatening to give me a bunch of cloud storage options so I can continue consume more and create more.

Of the 3 examples above Apple is the most "locked in" model.  I think they only reason they get away with it is vastly superior user experience coupled with fair pricing.  In the other cases  I’m free to use an alternative provider with little to no switching costs.  The point I’m trying to make here is that the companies above have captured better than most the notion of optionality in their business models.  They each have a core and then can extend that into adjacencies.

I think about this in the context of the company I work for, Lijit.  We started out by working on the simple idea of helping online publishers better develop a trust bond with thier readers.  This straightforward idea led to the development of tools, technologies and components to help publishers better engage and understand thier readers.  Over time it gradually evolved into a more complete platform.  A platform that was designed from the outset to simply help publishers.  By focusing on this clear and consice publisher-centric core value, we now are rapidly expanding our optionality as a business.   Whether a publisher wants to better his trust bond with readers, or engage readers more, or understand his readers more, or perhaps even make money from his publication.. we help; with options.  We don’t have to develop or "own" all the individual offerings.  Instead, we’re free to work across a wide spectrum of partners in each of the areas of engagement, trust, understanding, and money.

Any startup business has to start and end with a relentless customer focus.  That’s the core I mentioned above.  Without it, you’re toast.   But in order to build something that has a meaningful multiple of value that same business has to also build something that has baked in optionality.


After I wrote the above I got to thinking.. the whole optionality thing is sort of like a Swiss Army Knife.  It has a lot of options available: tweezers, toothpick, corkscrew, leather punch, and of course a knife.  But it’s the knife at the core that the options are built around.  A set of options without a core value isn’t worth crap.  After all, that’s why its called a Swiss Army Knife… 

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Staff vs. Line

Moving up through any organization is a tricky and non-obvious route.  Sure, some people have raw skill and natural talent; others have and adroitly exploit personal connections; still others leverage bravado or luck.  It wasn’t until I spent time at larger public companies working for professional managers that I was able to really understand how, generally, people move up through an organization to larger and broader roles/responsibilities.


Effective and disciplined business leaders typically follow a “Line – Staff – Line – Staff – Line” stair-stepping process:

1. Start off in a Line position.  A position where you focus on a specific discipline (Sales, Marketing, Engineering, Finance, etc.).  Focus on learning and expanding your depth of knowledge about that particular Line.  Stretch your knowledge and skill and find Line managers that are really good at what they do – learn from them – specifically what do they do that drives real and tangible results time after time.  In my mind it takes ~2 years on average to learn a solid level of Line discipline and skill.

2. Move into a Staff role next.  These jobs are by definition cross-functional.  This is tricky because it needs to be done explicitly as a stepping stone process with the goal to go back into a Line position when the opportunity presents itself.  Getting stuck in a Staff position is far too easy if you don’t constantly and incessantly try to make a noticeable impact on the business.  Staff positions enable you to see and work across multiple Lines, usually this is under a very senior executive or general manager.  The Staff role gives you visibility into how the different Line positions must work together to successfully execute against the business goals of the organization.  It helps you appreciate the importance of forecasting and delivering on results.

3. Find a Line position to move back to.  Your new found cross-functional knowledge enables you to take a higher position in the organization with more responsibility.  While you’re back focusing on a Line discipline, you now have the broader appreciation and understanding of other pieces of the business and how they work together.  If you can, switch Lines from your first one; i.e., move into Marketing if your first Line was Sales.  This later point is harder to do and may end up being a lateral move from your last position.  Again, this is tricky, so most folks will tend to stay in a particular Line as they move up.

Think of the “Line – Staff – Line” progression as a way to truly learn each discipline of a business.  Finding really good Line managers at each step is the key point. Learn from them, stretch yourself to try new things, figure out what works, what doesn’t, and why.

Thee ultimate “Staff” position is the CEO.  To be a great one, you have to have a solid understanding of each major functional Line discipline of the organization – and – you have to know how they work together and why.  In my mind there really is only one best way to get that in-depth solid understanding and that is to have done meaningful work in every Line.  Sure, there are those that short-circuit the process for whatever reason, but for the rest of us the Line – Staff – Line is the way to go.

A Tragedy of the Commons

I’ve been living and working in Colorado since 1994 when I first came to Boulder to get a Masters in Engineering.  At the time, I wanted to study this Information Super-highway thing and learn all about advanced data communications and the world wide web.  In grad school I started my first “real” company and raised a bit of venture capital. 

In Boulder its always been an incredibly collegial environment.  VCs, Entrepreneurs, retired business executives, and the like, all tend to take meetings, help each other, and share information in a  generally transparent and helpful way.  My experience in Boston and Silicon Valley is that these areas are more cut-throat and culturally competitive.  Here in Colorado the sense is that we all can work together to drive the collective ball forward.

No doubt the market here rose with the dot-com bubble and many new venture funds and companies got funding than should have.  In 2001, before the markets broke, it reached its zenith.

Over the past 2.5 years I’ve been completely heads-down helping build Lijit Networks from 10 people, no revenue, and a small market presence to 34 people, scaling revenue, and an utterly massive network that seems to grow now by leaps and bounds.  I’ve rarely had the time to really look around and see how the overall entrepreneurial environment has been evolving and changing.  Recently I had the chance to see and talk with a lot of folks about this evolution.  What I see is somewhat unsettling, but probably the best for the long-term health of the Colorado start-up marketplace.

VC firms are going out of business; some know it, some don’t.  Mostly the good entrepreneurs are busy with interesting projects.  There isn’t a lot of investment capital available unless the idea is big  – and – the people involved are really good.  This applies to both companies and VC firms.  And this is exactly what is supposed to happen.

The market here is small.  That’s a fact.  The market here is highly educated.  Also a fact.  The reason everyone pitched in to help each other and was culturally collegial in nature is that there was always a common sense that in order to compete we had to work together explicitly.  A culture was established and available to most anyone that was smart, serious, and contributed to the whole.

We are going through a natural cleansing cycle now.  We grew too fast, raised too much capital that chased too few good ideas and people.  We acted too much in our own self-interest.  The best part is that all of this is a natural process and one that is elegantly simple to resolve, the weakest die.  Self correction in an efficient market is built in.

I love the fact that the guys at the Foundry Group (one of Lijit’s lead investors) invest so much personal time and energy in programs like TechStars nurturing fledgling businesses and fostering green people.  I’m seeing more and more the collaboration between really smart local entrepreneurs carving out time to help each other even if their respective companies have overlaps in market goals.  Those of us that have an extremely long view of their careers are hard-wired to raise the collective market.  The cycle of where we are now produces better companies, stronger investment professionals and we, at least for a few years, can avoid the Tragedy of the Commons.

According to Wikipedia:

The tragedy of the commons refers to a dilemma described in an influential article by that name written by Garrett Hardin and first published in the journal Science in 1968.[1] The article describes a situation in which multiple individuals, acting independently, and solely and rationally consulting their own self-interest, will ultimately deplete a shared limited resource even when it is clear that it is not in anyone’s long-term interest for this to happen.[2]

Smart is as smart does


There are two market-facing types of smart.  What I call “Conference” smart and what I call “Customer” smart.

Anyone that’s been in a business leadership position knows or should know the different types of “smart” that people around them bring to the table.  Street smart.  Book smart.  Engineering smart.  Keep your mouth shut smart.  I don’t know what I don’t know smart.  And so on.

I’ve been to more than a few industry conferences – and I’ve been on hundreds of customer calls.  In turn, I get the opportunity to talk to lots and lots of people, asking questions, gauging each of their perspectives, problems, lenses on where they see their business and what opportunities that are important to them

Conference smart shows up when people go to lots of conferences.  Speak on panels, and generally hob-nob with other conference elite.  They learn the buzz-words, trendy jargon, what people say is the future and can recite the Industry luminaries (and celebrities) by first name – even better by nickname.  The close cousin to Conference smart is Book smart.  They just don’t like to travel to or don’t have the budget freedom to hit the conference circuit.

Customer smart is more gritty.  Not nearly as glamorous as the Conference smart, and definitely without the cocktail parties and trips to Vegas.  Customer smart typically comes with good sales people, but can also come from product leaders, marketeers and other externally-driven people that are interested in who’s buying what, why, and how.

Customer smart trumps Conference smart.  Both however are necessary if you want to be successful – and its important to combine the two when it comes to strategy and longer-range planning.  As my old boss used to say: “when in doubt, make a sales call”.

Smart people can ratfuck you if you’re not careful

Good intentions. Sage advice. Clever insights.  All good and worthy goals of a conversation with a smart person, a successful person, an influential person.  The problem lies in the clarity of what you want out of it and your perspective on the situation or issue.  Smart people want (desperately) to add value, show their intellect, solve a problem, and have you come away better for having spent time with them. Its human nature to want to be liked and smartness is a likeable asset.

1. Career advice

Who hasn’t asked someone for career advice?  We’ve all done it, and given the field I’ve chosen to work in, likely I’ll be seeking it again at some point.  The filter I learned early on was that most people give the advice to do what they did to get them where they are.  Caveat: I typically don’t seek advice from people that haven’t been successful in one way shape or form.

The advice goes like this: If you want to be a fill in the blank.  The advice you get is that the best way to get there is through sales, or marketing, or engineering, or being a ‘generalist’, or goofing off in Europe, or going to grad school, or whatever the background of the person giving the advice is/was that got them to their success.  Its not an intentional ratfuck, but its all too common and is nearly useless to the individual getting the advice.  Unless you too believe that dropping out of Harvard and starting a social networking site is the path to greatness.

In my mind great career advice starts with an understanding of what the advice getter’s background is, where they’ve had real success and real failure, and what their ultimate goal and desires are.

2. Board of Directors

I’ve been on both sides of this one a bunch.  You get a group of (by definition) smart people around a table to “direct” and advise, and keep on the straight and narrow a bunch of (hopefully) smart executives.  The board folks some to meetings and spend quality time with their peers (other investors, former executives, industry experts) once a month and, being human, they want to be seen as smart value-adding participants.

The potential to ratfuck you starts here with the well intentioned, but picks up speed with the their individual level of under-informededness, and achieves escape velocity if their ego is sensitive.  Unless one is plugged in to the market, major business happenings, and other near day-to-day operations then the value you’re adding could be the wrong value to the directees.  The trick on both sides is to gauge the level of direction needed and appropriate as weighed against the width of understanding the situation – of both the director as well as the directees.  Not an easy thing to do!

Some of the best board members I’ve ever had the pleasure to work with don’t talk a lot, but when they do its usually a question that seems to split atoms with its simplicity and directness to the essences of a particular issue.

3. Advisor or Mentor

This is the toughest to spot and the one most likely to really ratfuck you if you’re not careful.  Why? Because more often than not a close advisor or mentor develops a personal or emotional relationship with the advisee.  The ratfucking is unintentional, but no less wrong.  It comes from giving advice that has too much defense for the advisee and too little perspective of the bigger picture.  I’ve experienced this one and the only thing I can reflect on in retrospect is that the advice was too much exactly what I wanted to hear.  Bad decisions result, started in motion by the best intentions.


Great advice is really had to come by.  Most smart people aren’t sage advice givers.  If you find one that likes you, takes the time to really understand you, and tells you things that you don’t like or want to hear – but in retrospect were the right things you needed to hear – hold onto that advisor like gold.

Its all ball bearings – and it starts with a conversation

Its amazing to me what power a simple conversation has.  Conversations can build an incredibly powerful company culture, Conversations can lead to life-changing decisions.  Conversations can turn into fist fights.  Conversations can make your sales number for the year.

Its pretty simple when you think about it.  It all starts with a conversation.  The first time I really heard this was from John Dragoon (CMO at Novell).  John is one of those great presenters that can stand up on a stage in front of 1000 people and give a kickass presentation with nothing but slides with pictures and no words.  You come away remembering exactly what he said, what the point was, and what you can take away.  It feels like a conversation, I think, because he makes a connection with the audience that is authentic.

I read a lot, and recently a lot of that reading has been to understand the industry perspectives and trends as they relate to digital advertising, social content, and media.  As I write this, I’m attending the OMMA Global conference in NYC.  Much of the talk here is about the scarcity of attention and the need to engage in the conversation.  Conversations and authenticity matter in marketing and sales and in running a company.  Even if a conversation is brief, as long as its authentic and honest, that works for me.

What its not:

Its not a conversation if no one participates.  Check your tweet views, blog comments, or stats if you want third party confirmation.  Now for those of you with tons of the above: filter out your groupies and then look again.

Wasted conversations are like the plague.  Improve actors and sales people know this better than anyone.  Ditto for conversations that have a contrarian participant being that way just to be contrarian.  Wasted time and energy sucks.

What it should be:

An opportunity.  Every interaction is a chance to have a real conversation.  Sometimes they’re short (messaging service).