Mar 242011

Size of Pie, a.k.a. What Type of Entrepreneur Are You?

Size of Pie, a.k.a. What Type of Entrepreneur Are You?

Mmmm…pie.  A post that Fred had up a few weeks ago about an M&A Case study involving WhatCounts, a company in the email space that I’ve known and had a lot of respect for for years, got me thinking about two different topics.  The first is thinking about types of entrepreneurs.  I’ve always said there were two types:  serial entrepreneurs who are great at starting companies but less great at scaling them, and entrepreneurs who are often part of a group of founders but who go on to continue to run the business for the long-haul.

CEO David Geller’s quote that gets to the heart of this in Fred’s post was:

…a bigger piece of a smaller pie, at some point, is the same as a smaller piece of a much larger pie.  And, donʼt let anyone tell you that baking a bigger pie isnʼt a whole lot more difficult.

Although David is talking about taking in outside capital and founder dilution in pursuit of larger business growth and objectives, he is also getting to the same point about entrepreneur type.  Scaling an organization beyond proof of concept, happy few customers, and profitable to be a $50-100mm business (and beyond) requires a whole different skill set than starting something from scratch and turning an idea into reality.

And in a sense, David is right.  Baking a larger pie can be a whole lot more difficult for some entrepreneurs if they are more of the serial entrepreneur type, or at least it can be far less interesting and fulfilling if what gets you out of bed in the morning is creating new things.  But for other entrepreneurs who are more of the “run the business” variety, getting out of the creation phase and into the scaling phase is more interesting and maybe even less difficult.  Even though businesses are never de-risked and a larger business with more employees just means there are more chips on the proverbial table, baking a larger pie and tending to the things that come with it – people issues, innovating within a platform, solving customer problems – can be less daunting than creation for some entrepreneurs.  (Return Path is in its twelfth year – can you guess which kind I am?)

So David’s right in terms of his core point about founder equity value and how large a slice of how large a pie the founder ends up with.  But whether baking a larger pie is easier or harder is less about an inherent difficulty in pie-making and more about the type of entrepreneur involved.

I’ll cover my second reaction to Fred/David’s post next week.

 

Mar 102011

The Beginnings of a Roadmap to Fix America’s Badly Broken Political System?

The Beginnings of a Roadmap to Fix America’s Badly Broken Political System?

UPDATE:  This week’s Economist (March 17) has a great special report on the future of the state that you can download here, entitled”Taming Leviathan:  The state almost everywhere is big, inefficient and broke. It needn’t be,” which has many rich examples, from California to China, and espouses a bunch of these ideas.

I usually try to keep politics away from this blog, but sometimes I can’t help myself.  I’m so disgusted with the dysfunction in Washington (and Albany…and Sacramento…and…) these days, that I’ve spent more spare cycles than usual thinking about the symptoms, their root causes, and potential solutions.  A typical entrepreneur’s approach, I guess.  So here’s my initial cut at a few solutions.

I’m sure it’s incomplete, and it’s possibly overly simplistic.  While I think it’s a pretty pragmatic and non-partisan approach, I’m guessing people will have visceral political opinions about it.  Here are five things I’d like to see that I think will start us on the road to repair:

  • Nonpartisan redistricting: All districts at all levels of government should be drawn by nonpartisan commissions.  There is no reason to create “safe” seats and uncompetitive elections that drive candidates to extreme positions in order to win primaries.  All of that is undemocratic.  I hope California’s proposition that creates this kind of solution works and is copied.
  • Public finance of campaigns: This will have to come with a constitutional amendment limiting free speech when it comes to political campaigns, but we should be prepared as a society to limit freedom in that one narrow way in order to remove money from politics.  This topic just keeps coming up, from both the left and the right (think about the examples of Wall Street donations impacting financial reform on one side and public sector union political contributions impacting negotiations with states and cities on the other).
  • Presidential line-item veto: Its constitutionality may be in question, but this would give the President a more granular form of one check-and-balance he already has and could greatly help reduce wasteful spending as well as simplify legislation (more on that in a minute).
  • Auto-expiration of tax/spend bills: I found the debate over the expiration or extension of the “Bush tax cuts” to be enlightening.  Maybe some class of tax/spend bills — those over a certain dollar figure, those that create entitlements, though that involve government subsidies to industry — should be forced to be renewed every 5 or 10 years instead of being “evergreen” so that the debate can reoccur in light of changes in circumstance.  How many other things are “on the books” in ways that don’t make sense in today’s world?
  • Simplicity of legislation: The health care reform bill was 1,990 pages long according to the pdf I just downloaded, and few if any in Congress actually read the whole thing.  They even admitted it AT THE TIME.  Is this a smart way to govern?  Whether voluntarily or via constitutional amendment, Congress should consider only passing single-issue bills and maybe even limiting the size of any given piece of legislation to something that at least THEY THEMSELVES ARE ABLE TO READ.

These things should do a lot to ease legislative gridlock, relieve bitter partisan rancor, and remove some of the silly parliamentary manoeuvrings that plague our government today.  Whether or not they can systematically deal with elected officials’ unwillingness to tackle hard problems and penchant for personal deal-making and runaway deficit spending is another question.

My personal belief is that country could stand some form of a new Constitutional Convention to critically review our society and its governance after almost 250 years.  I love our Constitution and think it was wisely laid out as the foundation for what has become one of the world’s greatest and most enduring nations…but that doesn’t mean that the Founders, who lived in a very, very different time, had perfect vision for all eternity.