Apr 212011

Backwards

Backwards

I came to an interesting conclusion about Return Path recently.  We’re building our business backwards, at least according to what I have observed over time as the natural course of events for a startup.  Here are a few examples of what I mean by that.

Most companies build organically for years…then start acquiring others.  We’ve done it backwards.  In the first 9 years of our company’s life, we acquired 8 other businesses (SmartBounce, Veripost, Re-Route, NetCreations, Assurance Systems, GasPedal Consulting, Bonded Sender, Habeas).  Since then, we’ve acquired none.  There are a bunch of reasons why we front loaded M&A:  we were working hard to morph our business model to achieve maximum success during the first internet downturn, we knew how to do it, there was a lot of availability on the sell side at good prices.  And the main reason we’re not doing a lot of it now is that there’s not much else to consolidate in our space, though we’re always on the lookout for interesting adjacencies.

Most companies tighten up their HR policies over time as they get larger.  We’ve gotten looser.  For example, about a year and a half ago, we abolished our vacation policy and now have an “open” system where people are encouraged to take as much as they can take while still getting their jobs done.  Or another example is an internal award system we have that I wrote about years ago here.  When we launched this system, it had all kinds of rules associated with it — who could give to whom, and how often.  Now those rules have faded to black.  I’d guess that most of this “loosening up” over time is a vote of confidence and trust in our team after years of demonstrated success.

Most companies start by investing heavily in product, then focus on investing in sales and marketing.  Here we haven’t exactly gotten it backwards, but we’re not far off.  Two years ago, one of our major company-wide initiatives/priorities was “Product First.”  This year, we decided that the top priority would be “Product Still First.”  The larger we’ve gotten, the more emphasis we’ve placed on product development in terms of resource allocation and visibility.  That doesn’t mean we’re not investing in marketing or the growth our sales team — we are — but our mentality has definitely shifted to make sure we continue to innovate our product set at a rapid clip while still making sure existing products and systems are not only stable but also improving incrementally quickly enough.

I don’t know if there’s a single generalizable root cause as to why we’ve built the company backwards, or if that’s even a fair statement overall.  It might be a sign that my leadership team is maturing, or more likely that we didn’t know what we were doing 11-12 years ago when we got started — but it’s an interesting observation.  I’m not even sure whether to say it’s been good or bad for us, though we’re certainly happy with where we are as a company and what our prospects look like for the foreseeable future.

But it does lead me to wonder what else we should have done years ago that we’re about to get around to!

Nov 022010

Playing Offense vs. Playing Defense

Playing Offense vs. Playing Defense

I hate playing defense in business.  It doesn’t happen all the time.  But being behind a competitor in terms of feature development, scrambling to do custom work for a large client, or doing an acquisition because you’re getting blocked out of an emerging space – whatever it is, it just feels rotten when it comes up.  It’s someone else dictating your strategy, tactics, and resource allocation; their agenda, not yours.  It’s a scramble.  And when the work is done, it’s hard to feel great about it, even if it’s required and well done.  That said, sometimes you don’t have a choice and have to play defense.

Playing offense, of course, is what it’s all about.  Your terms, your timetable, your innovation or opportunity creation, your smile knowing you’re leading the industry and making others course correct or play catch-up.

This topic of playing defense has come up a few times lately, both at Return Path and at other companies I advise, and my conclusion (other than that “sometimes you just have to bite the bullet”) is that the best thing you can do when you’re behind is to turn a situation from defense into a combination of defense and offense and change the game a little bit.  Here are a few examples:

  • You’re about to lose a big customer unless you develop a bunch of custom features ASAP –> use that work as prototype to a broader deployment of the new features across your product set.  Example:  Rumor has it that Groupware was started as a series of custom projects Lotus was doing for one of its big installations of Notes
  • Your competitor introduces new sub-features that are of the “arms race” nature (more, more, more!) –> instead of working to get to parity, add new functionality that changes the value proposition of the whole feature set.  Example:  Google Docs doesn’t need to match Microsoft Office feature for feature, as its value proposition is about the cloud
  • Your accounting software blows up.  Ugh.  What a pain to have to redo internal system like that – a total time sink.  Use the opportunity to shift from a new version of the same old school installed package you used to run, with dedicated hardware, database, and support costs to a new, sleek, lightweight on-demand package that saves you time and money in the long run

I guess the old adage is true:  The best defense IS, in fact, a good offense.

Filed under: Business, Strategy

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Sep 262007

Lighten Up!

Lighten Up!

As with Brad, I love a good rant, and Dave McClure’s wild one this week about how VCs and Lawyers Need to Simplify, Innovate, and Automate is fantastic.  I have a roughly 3 foot shelf in my office that has all the bound paper documentation for the financings and M&A we’ve done here over the years and have always felt like it’s an enormous waste on many levels.  The insanity of the faxes, zillions of signatures, original copies, and triplicates is overwhelming.

But the core of the rant is a beautiful and simple suggestion that those who invest in lightweight technology companies and automation platforms should learn how to use just those technologies in their own businesses.  I couldn’t agree more, and it reminds me of my least favorite answer EVER from a VC about why some piece of legal documentation had to be done a certain way:  “Because that’s the way we always do it.”  That argument doesn’t even work when a parent uses it on a 5 year old!

I think lawyers are particularly problematic to this cause, because even if an innovative VC wanted to do things easier and differently, the lawyers would probably throw up all over it.  But in the end, if the VC is the client, he or she can and should overrule and manage counsel.  The world is now moving at too quick a pace to keep deal paperwork in the stone ages.

Filed under: Email, Venture Capitalists

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