The 10 Most Important Business Lessons I’ve Learned

Here are the most important business lessons I’ve learned building iContact from 2 to 220 employees over the last eight years.

1. Just get started, have a bias toward action, and don’t get stuck in analysis paralysis.
2. To grow your sales, it is critical to calculate the lifetime value of an average customer, calculate what you’re currently paying to acquire an average customer (total monthly ad spend divided by customers acquired in that month), determine the maximum you’re willing to pay to acquire an average customer, and scale your marketing scientifically by testing relentlessly and finding the channels in which you can acquire customers for less than your maximum acceptable customer acquisition cost and then growing spend within those channels.
3. Never raise more equity capital than 1x your current annualized revenue (monthly revenue x 12). If you raise too much money too soon you’ll give up too much ownership and control of your company and be tempted to spend the money in ways that aren’t carefully controlled. Wait to raise a large round until you have proven mathematically than $X amount of additional spending with generate $Y amount of additional revenue. (once you figure out #2 this is easy).
4. If you choose to raise money, raise it from investors you like and get along with well. You’ll have to hang out with these people for the next 3-7 years, make sure you enjoy spending time with them.
5. After the first year or two, your success is determined by the people you hire, not by you. Stop trying to do everything yourself. Scale yourself by hiring people more experienced than you in their field as soon as you can afford to.
6. Every member of the team should have a significant portion of their compensation based on the company’s success and their department’s success, quantified and communicated clearly in advance.
7. Your job as CEO is not to micromanage/tell your team members what to do, but rather to hire experienced people who can do their jobs better than you could, collaboratively set numerical goals, and hold your direct reports accountable for their performance individually and as a team.
8. Once you get past the start-up phase when you’re responsible for everything, the five parts of a CEOs role are 1) Set strategy and vision 2) Manage the senior team 3) Communicate with stakeholders 4) Oversee resource allocation and 5) Build the Culture.
9. It is possible to become more socially and environmentally responsible and increase your financial returns at the same time
10. If you create a great culture (a fun work environment filled with people who are high performers and who care about their work and their impact on the world) you will be able to attract and retain better people who will be much more engaged and productive and create a much more financially successful company.

I’ll be writing more about building a great company culture in the next post.

What lessons have you learned over the years in business? What do you think about these lessons?

How I Aligned What I Love With What I Do & Scaled Myself

This post will require a certain degree of vulnerability. Sometimes we build a hard shell around us when we’re going through difficult times. This is a story of personal growth.

A year ago I was sitting late at night in my Durham office at iContact wondering if I’d become a corporate sellout.

Was I trading in some of my most productive years of life to build a company I was no longer passionate about?

I had gone from being an entrepreneur to a manager. I was 24 and we had 150 employees and $20M in sales. I was dealing with purchase order forms and paid time off policies. We had achieved all the goals we had ever set out for ourselves. Where was the entrepreneurial passion?

We had gone from #20 to #2 in the market in five years and I had no idea how we’d get to #1. I thought it might be the time to start thinking about finding my replacement.

Even though we were still growing very quickly, we weren’t quite growing at the same percentages as we were before and for the first time in our company’s history we were going to have a year in which we would not double sales.

My confidence was wavering. I had made some big mistakes:

• I had waited too long to launch a stock option plan for the whole company.
• I hadn’t hired a CMO soon enough.
• I hadn’t built the right ecosystem of mentors that could help me get to the next level as a CEO.
• I had focused too much on the surrogate-family side of our culture and not enough on the performance-focused side that was needed.
• I hadn’t created values that people believed in and used every day. I could recall just four of our ten values without looking.
• I had waited too long to start a formal manager training program.
• I hadn’t truly aligned my passion for social responsibility into the ethos of the corporation.
• I hadn’t created any effective mechanism for communicating strategic direction to the company and we had a lot of confusion as to what our focus was and operating choices were being made with different assumptions as to direction.

And these were just the mistakes I knew about!

Was I Right for the Job?

As I sat there in May 2009 I wrote in my journal “I’m not sure I’m the right person anymore to lead the company into this next stage of growth. We need to make some changes to keep the growth and hit our goals. Scary to think about. Terrible to have lost some of my confidence.” I wrote an email to our CFO on May 20th thinking about succession planning for me.

I wasn’t sure whether we should try to get acquired or keep the faith that we’d get to the $60M-$70M in annual revenue needed to go public and stay on track for the 2012 IPO. At certain points I lost the faith.

Finally in July we got the CMO we wanted. And things were looking way up by the end of the summer when we got an investment term sheet with a nine figure PMV. Wow!

But then came October. In the same week my business partner got cancer (he is now doing well!), my mom started having worsening chronic arm pain (she is now doing better), and a company that was looking to acquire us told us they weren’t going forward. I guess they say that difficult times are the foundry from which greatness is cast. But it’s sure not fun being the molten iron!

Through that baptismal fire I came to a critical understanding of self and what I needed to do to align what I love with what I do–something I’ve been preaching atop the mountain for five years in speeches but only half-heartedly living. It helped me discover my authentic self. It helped me find my Csikszentmihalyian flow.

Motivated More Than Ever

So I sit here tonight in my home in Chapel Hill motivated more than ever. iContact is now at a $34M revenue run-rate and growing that by more than $1M each month. We will hire more than 50 new team members in 2010. We had our first ever post-investment EBITDA positive month in December(!!!). We’re well on our way to fulfilling our dream of “building a great sustainable company in NC for our customers, employees, and community.” And we’ve got a plan to go from #2 to #1. We have a plan to win.

I no longer question whether I’m a corporate sellout putting in my time. I’m aligned, I’m focused. I’m learning. I’m surrounded by amazing people every day who know how to do what they do so much better than I ever could.

What I Changed?

So what did I do? Three things (and I’m still working on fully implementing them)…

1. I worked to align my long term life mission with what I do everyday today. My life mission, the one that’s been on my bedroom wall since May 2007, is to “be a leader of our generation as we work to end extreme poverty in our lifetimes.” While I was learning a lot about leadership and management and being paid to do it, I was somewhat unclear how building a SaaS company aligned fully with a passionate desire to end extreme poverty in the developing world over the next fifty years. The incessant question in my head was whether I’d be better off finding my replacement and either applying to the Kennedy School of Government or moving to Africa to invest in entrepreneurs there. I learned a lot about the integrated 1/1/1 corporate philanthropy model of Salesforce.com and wanted to see if we could do that at iContact. On January 8th, 2010 we launched an expanded CSR model, what we call the 4-1s Corporate Social Responsibility Model, at iContact in which we take 1% of equity, 1% of product, 1% of employee time, and 1% of payroll and invest it in local and global non-profit organizations. Since we’ve expanded this CSR program I’ve been able to see the tangible and immediate connection between my passion for social responsibility and what I do going to work every day. In 2009 iContact contributed $109,000 to 63 different 501(c)(3)s and in 2010 we’ll reach $150,000. But it’s not just money anymore. Now, each of our employees has the opportunity to be paid to take 1% of their time (2.5 days off from work) each year to do community service during business hours, which we’re tracking through VolunteerForce. While we’ve got lots of work to do to improve it, the model has real impact and tangible value for us and the community and it’s significantly helped me to a much greater degree see the meaning behind what we do everyday. I love it!
2. We changed our company values at iContact. I realized in July of last year that we had ten “Corporate Values” but I could only remember four without reading the sheet. At an EO entrepreneurial exec ed program at MIT in June I learned you should never have more values than you can remember and that to be worthy of being a company value you’d have to be willing to let someone go if they didn’t live up to it. Our values fit neither requirement. In December at our two day Senior Leadership Team (SLT) offsite in Chapel Hill we came up with WOWME. WOWME stands for 1) Wow the Customer 2) Operate with Urgency 3) Without Mediocrity 4) Make a Positive Wake and 5) Engage as an Owner. We launched these values last month at iContact and now every SLT member knows them by heart and we’re working toward all managers using them during every performance and coaching discussion. We will hire and fire by these values, live up to them, and hold each other accountable to them. They’ve even inspired me to pick up my game and get it in gear. I love it!
3. I let go of control. The best thing I’ve ever done for the growth of iContact is let go of control (and I’m still working on this skill). We have a six person Senior Leadership Team at iContact that can all do their jobs much much better than I can. We now have a thirteen person Leadership Team underneath them all of whom have more business experience than I do. When I realized that my job was not to ensure they did their jobs the right way but rather to enable them to do their jobs and hold them accountable for the results, my world shifted. I’m still learning in this area, but this single realization is enabling me to scale. I now focus on 1) people 2) strategy 3) culture 4) investment. Each time we get to a new stage in our company’s growth ($100k, $1M, $5M, $10M, $25M) I have to reinvent myself and my job description. I love it!

And here are some other life changes that are less critical to helping me align what I do with what I love, but are still fun to share…

1. I made an equity investment in an African company. On January 4th I became a 10% owner of Village Energy Ltd. of Kampala Uganda. For four years I’ve been personally making contributions to non-profit organizations focused on ending global poverty. My philosophy has changed on economic development over the past year. Today I believe that while effectively monitored bilateral aid is an important component of ending extreme poverty and emergency humanitarian aid is morally and critically necessary in many locations, an investment in a local entrepreneur in Africa will have much greater long term impact in terms of job creation, tax revenue base, and constituent-focused democratic institution building. I was very excited to invest in Village Energy which is bringing a $60 solar panel powered LED lighting solution to rural village homes through a microfinance and franchise distribution model for $3-$4 per month per home. The product is a substitute good for kerosene which often costs $5 to $6 per month, causes lung inhalation problems and often burns down the thatch houses. I hope this $15,000 investment turns out to have much greater social impact than a $15,000 contribution. There is SO much opportunity to invest in Africa and so many entrepreneurs and companies poised for growth. And there is a huge gap between the countless MFIs that loan out $50 to $1000 and the Acumen Fund which invests $50k to $250k. Ten years from now I dream of running a socially responsible venture capital firm on the African continent. The challenge will be finding a scalable model of investing $5000 to $50,000 at a time. I think it can be done. I know the pipeline is there.
2. We started a new entrepreneurial division of Virante. Virante is a 11 person company downstairs in the iContact building that I started as “Virante Design & Development” in 2000 that is now run by CEO Malcolm Young. I won’t say much about this early stage effort now because the team is still acquiring all the related domain names and IP, but it’s a socially responsible ecommerce play that I’m extremely excited about. Fortunately we’ve already got the team to make it happen and it won’t take much time. With the help of the Virante team and a 17 year old intern Aneesh that comes in each Wednesday they’re making it happen. Here I must quote my new New York friend Kim Scheinberg, “Starting a company is like having a baby. By far the most enjoyable part is the idea conception phase.”
3. I followed my passion for writing and started the next book. This post is the beginning of book #2. My plan–one 5 page blog post per week that by the end of 2010 will be a ready to become a book. The title–”Dare Mighty Things: How Entrepreneurs & Social Entrepreneurs Are Changing the World.”

I have had two wristbands on my wrist since November. The first one says “Make Poverty History.” The second, “$100M in 2012.”

Thank you to everyone who has supported me through this endeavor and to all who are with us in this journey.

Here we go…

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Thoughts, comments, suggestions??? Feedback is the breakfast of champions!

Beware: The Beijing Tea Ceremony Scam

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The fireworks are blasting outside my window as I write. I happened to have arrived in Beijing on the night of the Festival of the Lanterns, which involves hours upon hours of continuous fireworks all over the city. Today is the 15th day after the Chinese New Year on January 26, and thus the fireworks. Here’s a photo from my hotel window about 20 minutes ago.

On the way from Chicago this afternoon, instead of flying West like I expected we would, our plane flew North to the North Pole, and then South down to China. Here’s a photo of what the map looked like from the video monitor on the plane seat. What an interesting way to view the Northern Hemisphere.

So after flying over Canada, the North Pole, Siberia, Russia, and Mongolia I landed in Beijing at 4:30pm this afternoon. I got into my hotel around 5:30pm and although tired decided I’d go out. I decided to go see Tienanmen Square and the Forbidden City and walk around a bit.

Here’s where the scam begins.

Walking right in front of the Forbidden City, two English speaking Chinese students came up to me and asked if they could practice their English with me. Having seen plenty of pickpocketing during planned distractions throughout travels in Europe (especially in front of the Coliseum in Rome), I was very aware and was skeptical of what these two young girls were after. They were dressed conservatively, so it didn’t seem like they were trying to sell themselves.

I said sure to them practicing their English. They explained they were in Beijing for two weeks studying English and had decided to come out to see Tiananmen. They asked lots of questions and gave lots of compliments. After about fifteen minutes of talking and them explaining the Festival of the Lanterns and their backgrounds they frankly had gained my trust. Seemed like they were actually two 22 year old college students named Jing Li and Ling studying English. Since I didn’t have anything to do until the morning I said yes when they asked me to get tea with them.

We walked for about ten minutes and ended up at the Si Zhu Xiang Tea House at 15 Nan He Yan Street in the Dong Cheng District. We were led into a room where 10 very small sample teas (less than an ounce) were poured (without ever being provided a menu). When I got the bill for my tea, it was of course in Yuan. I foolishly didn’t know the exchange rate. So I paid the bill thinking to myself, OK 10 small tea samples adding up to about one full cup of tea, this can’t be more than US$20.

When I got back to the hotel, I checked the exchange rate and found out $1 was equal to 6.7 Yuan. They had charged me 2112 Yuan or in U.S. Dollars, $308.90 for the tea.

I then Googled the name of the place, Si Zhu Xiang Tea House and found that I wasn’t even close to being the first to get taken by the now infamous Beijing Tea Ceremony Scam. Those “friendly college students wanting to work on their English” are paid by the tea house. It seems that ‘entrepreneurship’ is alive and well here.

Yep, I was taken on my first night in Beijing. In the very first hour too. Here’s to Visa’s fraud protection.

And hey, I even got a picture with Jing Li in front of the Forbidden City. Here she is, the girl who scammed me with a victory sign…

At least I’ve got a good story now. . Here’s to the Festival of the Lanterns and to “becoming a more experienced traveler.”

Tomorrow, the real work begins.

The 50 Personal & Business Lessons I Learned in 2008

At the end of each year I post the business and personal lessons I learned that year. You can see the 2007 lessons here, the 2006 lessons here, and the 2005 Lessons here. Here are the 50 Personal and Business Lessons I learned in 2008.

The 25 Personal Lessons I Learned in 2008

1. Don’t Cheat on Your Wife. Don’t cheat on your wife, period. But especially don’t cheat on your wife if you’re planning to run for national office. I learned this lesson from John Edwards in August.
2. Don’t Hire a Prostitute. Don’t hire a prostitute, period. But especially don’t hire a prostitute if you’re already well-recognized and a Governor of a major U.S. state. Thank you Elliot Spitzer.
3. (Some) Women Can Get Very Jealous of Other Women – I am very careful not to over-generalize here. In my experience, some women can get very jealous of other women, especially those that you previously dated, even if there is no real reason for them to be. If you’re in a relationship with a woman that you care about, make every effort to make her feel like she is the only one. Make sure she understands she is the person you want to be with.
4. Women Have Amazing Natural Instincts. Remember when you were a kid and you thought you were getting away with something but your mom knew all along. I thought I had hid the bottle of Bacardi 151 safely in my closet and then one day it was gone without explanation. Yes, women have amazing instincts and will generally catch you at anything you get yourself up to. Be open, honest, up front, and transparent with them.
5. Don’t Fall For A Woman Until You Know Her Well. Don’t fall for what you think women are or who they are on paper, but rather who they actually are, whether they like you back, and how well you can communicate. I’ve made mistakes in this area a few times in the last two years–falling for women based on who I thought they were (or who I wanted them to be) rather than who they actually were, whether they liked me as well, or how we communicated.
6. Life Can End At Any Time. Live Fully And Don’t Wait to Make a Difference. On March 5, 2008 UNC Study Body President Eve Carson was killed in Chapel Hill by multiple gunshots to the head after being kidnapped from her home. I knew Eve when she was Co-Chair of Nourish International. I wrote this post at the time. The words of her father, Bob Carson, at her memorial service on March 9th will forever live with me…
   

   “I see a stunningly beautiful convergence of talent and caring in this, our children’s, generation. I believe that these kids, along with their peers around the globe, can reach reasoned solutions for mitigating violence and tacking many of the inequities of poverty, prejudice, inadequate healthcare, and under-education. This is no pie-in-the-sky-wish! These kids are smart. They’re so capable. They’re more productive because they collaborate and communicate like no generation before them… But I must tell you–even with an aching heart, and yet with such hope and love–that the friends of Eve, and their generation, will not be denied. They’ve got miles to go and missions to keep.”

7. Humor has great power. Jeff Dunham is absolutely hilarious. Achmed the dead terrorist is perhaps the funniest politically incorrect puppet in the history of puppets. “Silence! I kill you!”
8. When You’re Speaking to Middle Schoolers, Use Audience Interaction. In February I talked to 200 middle schoolers at Moore Museum Middle School in Raleigh. It was my first time talking to that age of audience. I learned a few key lessons regardless of your age. Don’t go more than 5 minutes without asking the audience some form of interactive question. Use vocabulary that is at their level. Do cool dances. Do not show vulnerability. Get your message tight and repeat it.
9. It’s Hard to Beat Oprah. On February 5th my book Zero to One Million launched from McGraw-Hill. It reached #2 on Amazon and made the Wall St. Journal Bestseller List after an aggressive launch through social media and friends of mine with large email newsletters. We reached 4 million people and sold about 4,500 copies that day via Amazon, more than the 2,500 books one has to sell on a normal day to reach #1. We would have reached #1 had it not been for Oprah promoting Eckhart Tolle’s new book A New Earth on her show that day causing it to sell 7,500 copies in a day.
10. You’ll Get Sick If You Sleep in the Cold. In January, after speaking at Fairmont State University in West Virginia, I slept in the Extreme Entrepreneurship Tour RV in a parking lot instead of getting an extra room at the hotel we were at. It was about 70 when I went to sleep at 1am but about 40 when I woke up at 9am. I didn’t know that the generator (and thus the heat) had been left off. I was sick for the next week. I learned that when you sleep in a place that gets below 50 degrees, you will more often than not get a cold as your body doesn’t have the heat to kill germs and infections.
11. Arrogance is Being Dismissive of Others Not Overconfidence. Growing up, I thought the definition of arrogance was having too much confidence. This was difficult for me to understand as I’ve always been an extremely confident person and knew that over-confidence was absolutely essential to any chance I had at succeeding at a young age. After a number of good conversations with my former girlfriend Erin I was able to learn the lesson that arrogance is not over-confidence, it’s being dismissive of others and not showing care toward them.
12. In Berlin, People Go Out Every Night of the Week. I was in Berlin in May with the Transatlantic 2020 program. The young people in Berlin tend to go out every night of the week including strange nights like Sunday, Monday, Tuesday, and Wednesday. I went to a Techno Club called Tresor in Berlin on a Tuesday night and it was absolutely packed.
13. In Dubai, You Can’t Get In a Nightclub Unless You Have a Woman With You. I was in Dubai for a night in July with my roommate Roey Rosenblith. We were on a stopover on our way to Uganda for a week. It was a Saturday night. We went out expecting to see the tales of the crazy Dubai we had read about in Rigged. The reality, two 23 and 26 year old Americans could not get into a nightclub in Dubai without a woman with us unless we bribed the bouncer with $30 each which we refused to do on principle. We should have found a woman to say she was with us.
14. In Uganda, The Driving is Insane. I’m not talking mildly insane or moderately crazy. I’m talking absolutely off-the-heezy psychotic. I remember riding in the passenger side of a van driving on a two-lane dirt road while our driving proceeded to pass a car that was already passing another truck, causing us to end up in the dusty shoulder of the other side of the road while a truck carrying about 35 people standing it its back rambled toward us.
15. There Are Tremendous Investment Opportunities in Africa. In Uganda there were so many business opportunities. Incorporating a business (which Roey did while there) took only 3 days versus 3 weeks in the U.S. There were 20 story skyscrapers, lawyers, and banks. Africa is by no means represented fully by the pictures of suffering children we so often see (which is also real). Much progress can be made in reducing poverty through socially responsible investing and entrepreneurship.
16. Seek to Understand The Other’s Perspective. One of the most valuable things I learned from Vanessa while dating her this year was how she was able to be so compassionate and universally loved. This seems so obvious in hindsight. I learned that she always first looked at things from the point of view of the other person.
17. Don’t Forget To Be Your Age from Time to Time. One of the lessons I’ve learned most from my friends James Forsyth and John Hinson this year is to open up, be real, and take life less seriously. To act my age from time to time rather than acting 40 all the time. Since taking this lesson to heart, I often can be seen dancing to Flo Rida, swimming on the floor of my office with deer or talking to my stuffed animals on a love seat . There may n ot be many CEOs who would do this, but wouldn’t the world be more enjoyable if they did?
18. It Takes 10 Years To Become Great at Anything. Here’s a key learning from Malcolm Gladwell. It takes about 10,000 hours (10 years at 4 hours per day) to become Great at anything. You can only become Great at 6 or 7 things in your life. Choose carefully.
19. Don’t Leave Your Blackberry in Your Pocket When You’re Making a Speech. Even if you’re phone is on silent, your phone will cause the microphone to go nuts when it rings due to interference.
20. If You Drop Your Blackberry in the Toilet, Get it Out Quickly and Remove the Battery. I did this in October at a EO retreat at Lake Gaston. I removed it quickly, dried it upside down, but was unable to save it from certain death. I later learned had I removed the battery right away and let the battery dry separately it would have had a chance due.
21. There Is A Lot of Crap in the World. Genocide, war, people getting hung, shot, run over, earthquakes, vitriol, people who don’t believe in you, murder, rape. Sometimes it’s difficult to cut through it all and believe that anything is possible. And yet, a driven, caring, passionate individual can make a huge positive difference.
22. The Value of a Human Life is Equal, But Most People Don’t Agree With Me. When you see Cyclone Nargis kill 146,000 people in May in Myanmar and an earthquake kill 69,000 in the Sichuan province of China just two weeks later and so few people talk about it or even remember eight months later, it definitely takes a toll on my human spirit. For some reason the value of lives is seen as different based on which nation-state someone is from. When 200 Americans are killed it’s the biggest story for three months. When 100,000 Asians are killed no one remembers 90 days later. What the f? To me a human is a human regardless of where he or she was born or is currently located. I wish our media agreed.
23. Photography Has Great Power. Just look at this collection of 2008 in Photographs (part 2, part 3).
24. It is Better to Love and to Lose Than to Never Love at All. In other words, it is better to live life to its fullest, even if one day you may forget it. The key message of Eternal Sunshine of the Spotless Mind.
25. I Love New York. I was sitting at a Starbucks in Murray Hill (around 30th St and Lexington on the lower east side) over the Memorial Day weekend in May. I love the architecture, the culture, the art, the diversity of people, and the drive of the young people that live there. It’s the commerce capital of the world and you can go hip hop dancing every night of the week. While long term I want to end up in beautiful North Carolina, I do look forward to living in Boston and then NYC at some point in the next ten years. I wrote in my journal while at that Starbucks.
    

    “There are just cute, smart, driven, ambitious 24 year old women fricken everywhere. Especially love the Murray Hill area of town where I’ve been staying with Ryan Alovis. The parks are great. Walk back from Union Square was great last night. And all the investment bankers and private equity managers are here too. You can get anything you want anytime you want. Seriously, 2 more attractive mid-20 year olds just walked by. And another. And all wearing spring dresses. So much great diversity. Columbia was beautiful yesterday. So much activity and action. OMG another one. They are all over the place. People smiling, living. Restaurants, bars, parks, dancing, expression, tall buildings, public transport, sports teams, big concerts, being able to be yourself.”

The 25 Business Lessons I Learned in 2008

1. Business Conditions Can Change Quickly. There was a Sunday night in September that changed everything in the financial world. In one day, Lehman Brothers had filed for bankruptcy and Merrill Lynch had agreed to be acquired by Bank of America. Still to come was the AIG bailout, Morgan Stanley and Goldman Sachs’ conversion into bank holding companies, and the sale of Wachovia to Wells-Fargo. In our world of Software-As-a-Service (SaaS), average valuation multiples dropped from 3.5x to 2x forward year revenues in just 45 days.
2. There Are Parts of the Stock Market I Don’t Yet Fully Understand. Although I’ve been an entrepreneur since age 11, majored in economics, and read everything I can get my hands on about finance I’ve still got a LOT to learn about markets. On September 16th, I thought that the Fed bailout of AIG would stabilize markets and that the DJIA had seen its low at 10,742. Sixty-four days later the Dow closed at a low of 7,552, another 29.7% drop. I’ve still got a lot to learn about the TED spread, credit default swaps, liquidity, and the effect of rapid de-leveraging.
3. There Are Parts of the Commodities Market I Don’t Yet Fully Understand. I also thought that the per barrel price of oil had seen it’s low at $88 in September after dropping from $147 in July. As of December 27, the price of a barrel of crude on NYMEX is $37.71. You’d think that the price of such a fundamental commodity to world growth couldn’t possibly drop 74.6% in six months–but you’d be wrong. Ahh, hedge funds, speculation, and perceptions of demand.
4. Don’t Fret About Decisions That Aren’t Yet On The Table. In August I found myself spending hours and hours considering and debating whether iContact should raise another round of venture capital or not. We had six firms interested, all at nice valuations and at favorable terms. It was just a matter of 30 days or so until we got term sheets. I spent four hours one evening while at a Pacific Crest conference in August writing an 8 page analysis of the pros and cons. By the end of September, the market had changed dramatically and all the consideration was irrelevent. I spent a few too many hours considering what we would do in a scenario that wasn’t yet on the table. We ended up choosing not to raise equity capital and went with a venture debt round from North Atlantic.
5. If You Raise Venture Capital, the Required Sale Price of Your Firm Goes Up to Have Equal Success. I learned this lesson in 2007 when we raised our first round from Updata Partners. At that point, we could have had a very successful exit for iContact at any reasonable sale price (since we received our shares at par value of $0.001 each). Once we raised funds at a $30M post-money valuation, suddenly we had to have an exit north of $60M to be seen to have had a success (and $90M for a true success) in the eyes of our investors. This ‘re-setting of the bar’ phenomenon due to a new investor coming in at a higher per share basis price is key for entrepreneurs to consider when deciding whether or not to bring on outside capital.
6. Viral Video Can Be A Powerful Form of Communication. Our iContact iNews videos have been powerful for building and sharing our culture. The Yes We Can video got over 14 million views and made an important impact in the primary election vs. Hillary Clinton. It was released just three days prior to Super Tuesday February 5th. Virtualization server company VMware hosted a viral video contest called “Virtually Famous” in May. They basic ally got all their users/fans to produce a catchy advertisement for them. Then they had their fans’ colleagues and friends vote on the best one–which drew tens of thousands of new viewers to watch an ad for their company. My friends from Cary won with their production “Hardware Hotel.”
7. Focus. Something I’ve learned to be critically important is focus. Once I figure out what I want to achieve I go after it until it has been achieved. Right now and for the next few years of my life my focus is building iContact into the leading provider of email marketing services for SMBs and non-profits. Nothing will stop us.
8. Let People Know What You Are Doing And Why. Have conversations with your key people to let them know what you are doing and why. Even if it’s absolutely clear to you why your top 5 business priorities are your top 5 business priorities, that does not mean your direct reports understand why you are working on what you are working on. Have frequent conversations with your team about the company’s top five priorities and your top five current priorities. I choose to list them monthly in a powerpoint package we review as a team.
9. Get Input in the Planning Process. Even if you have the best plan in the world it won’t matter if it doesn’t get executed well. And it won’t get executed well if people aren’t bought into it. They simply cannot buy into it unless they understand the reasons for it and have a role in providing input and structure.
10. What you Measure, Gets Managed. If you measure, set a target for, and compensate on a KPI (key performance indicator) like phone abandonment rates, your phone abandonment rates will suddenly improve. We started measuring phone abandonment rates (the % of your customers who hang up while on hold before you can answer the phone) in July of this year and within 6 weeks the percentage of abandoned calls went from 9% to 4%.
11. Human Psychology Responds Well to Deadlines. There is great, great power in using deadlines, especially as it relates to sales. Our previous record for new customers in a day was 106. On March 31 this year, during an end-of-quarter sale, we added over 225 new customers during the day. Of course, there was an added incentive that day…
12. When You Want a Team to Reach a Stretch-Goal, Say You’ll Shave Your Head. It was March 9th, we were on track for about $930,000 in sales for the month. I told our team at a company lunch if we hit $1 million in sales that month, I’d shave my head. We hit $1,030,000 and there went my hair.
13. Let Your Customers Play a Big Role in Product Management. When you’re ready to improve your product or add additional products, don’t add what you think your customers want, add what they actually want. Ask your customers informally via focus groups and formally via an online survey. Ask them what their needs are and what additional features or products that they would receive value from. Also keep in mind that sometimes having too many features can decrease ease of use of your product and thus lower conversions. The book The Breakthrough Company has a good saying–”As you diversify, let your customers lead you.” The book Ready, Fire, Aim says (and I’m paraphrasing here), “Let your customers determine your development order and timeline by a vote.”
14. My Ideas Matter Less Now. When we had 4 or 8 employees, my ideas were important. Today, at 150 employees my ideas don’t much less than those of the team we’ve put together. What’s important is that we’ve hired the right people, put the right systems and processes into place, and empowered them to think and execute. Today, my time isn’t spent writing Product Requirement Documents or Marketing Plans, but rather ensuring our team has what they need (capital, people, systems, metrics) to get their jobs done. Today our focus in to build our team up into leaders, thinkers, and innovators.
15. Everything is Negotiable. At iContact, we have one of the best CFOs in the technology business period, Tim Oakley. He is a tough negotiator. I’ve learned from Tim that everything is negotiable. There is no such thing as “reality” as every single person has a different perception of reality. Therefore, one can guide and structure reality. Reality is negotiable.
16. M&A Firms Position Exit Value Using Synergy Value, Scarcity Value, and Strategic Value. We hired an investment banker to assist us in raising our round of investment this year. As part of this process, we learned a lot about mergers and acquisitions of companies, which they also represent companies for. Investment bankers will work to position a company at a premium to the valuation of comparable companies by assessing synergy value (the value of the added cash flow created by selling the products and services of the acquired company to the customer base of the acquirer), scarcity value (the added value if there are few substitute companies that an acquirer could purchase instead of you) and strategic value (the added value to the acquirer of your brand, competitive position, team, processes, culture, technology, and intellectual property that will help them create added cashflow within their own business).
17. Restate The Other Person’s Point Before You Begin. A lot of managers are poor listeners. Two years ago in improv classes I learned the “Yes And” principle. The same principle can be applied to either external negotiations or internal debates to help people feel heard and valued. It can be extremely helpful when in a discussion or debate to purposely restate the other person’s point and then add on to it. Try starting with “Yes, I see that such and such and…” instead of the too common, “But.” The formula is [RESTATE THEIR POINT]… and…[MY POINT OR COUNTER-POINT].
18. Market Valuation is Determined By One Willing Buyer and Seller. The valuation of any company is determined by a number of factors. All valuation models eventually come down to the present value of future net profits. The challenge is in figuring out what you actually think those future net profits will actually be and then which discount rate to use. But the bottom line is that valuation is simple–it’s the price a willing buyer and a willing seller agree upon.
19. All Disappointment in Life is Caused By Misset Expectations. This phrase is the perhaps the favorite saying of Tim our CFO after ‘net-net’ and ‘the sale is different from the install.’ It means that unhappiness in business and in life is caused when reality turns out different than expected. The human mind needs time to adjust, plan, project, and set expectations. For example, if you know that you are going to have to send a team member to Las Vegas for three months for a project (which could be exciting or disappointing depending on the team member), tell them as soon as you know not a couple days before they have to go. By telling them right away they will have time to adjust, plan, project, and set expectations and will be much more likely to enjoy the experience and be productive. I didn’t understand this when I was younger, but people require time to adapt to upcoming change.
20. Always Be Testing. If you or your company is not using at least 15% of your marketing budget to test new marketing channels each month, something is wrong. One should always be testing new customer acquisition channels. And don’t say you’ve tried them all or there aren’t enough to test. Have you tested local radio, network radio, satellite radio, classified ads, magazine ads, trade journal ads, newspaper ads, newspaper inserts, flyers, vertical-targeted direct mail, market-targeted direct mail, direct mail inserts, local television, cable television, DRTV, skywriting, phonebooks, airport ads, online co-registration, offline co-registration, affiliate programs, CPA deals, call centers, tradeshow sponsorships, search engine optimization, paid search, and banner ads? If not, get to work!
21. Don’t Make Too Few Mistakes. The corollary to testing with 15% of your budget is to be willing to make mistakes and learn from them. In business and in life you learn when you make mistakes. Mistakes are how you grow and scale. Make sure you are failing at a high enough pace in order to succeed.
22. Enable an Environment of Trust. As a Director Team we read Patrick Lencioni’sThe Five Dysfunctions of a Team at our annual Director Retreat in Virginia this year. Here’s an overview of The Five Dysfunctions. One of the key principles of the book is to work actively to get your management team to understand each other and where each person comes from. The first exercise we did at the retreat was to share our ‘personal histories’ with one another. We shared basic information like where we were from, siblings, first job, worst job, why you came to iContact, and life goals. It was amazing what we learned from people we had been working with for years.
23. Have Some Conservatism in Your Annual Plan. Most companies once they leave the start-up phase develop what’s called an annual plan. In it, you project your bookings, revenues, expenses, net profits, and cash flows by month usually about 3-4 years into the future, with particular focus on the current and upcoming calendar year. It’s basically a budget with variable drivers (in our case acquisition, churn, and average revenue per user). At iContact, we have an Annual Plan that is reviewed and approved each December by the Board. Once you raise venture capital, you are judged as a CEO primarily by whether you hit or miss your projections. Many CEOs make the mistake of making their projections unreasonably high in order to get a higher valuation which then causes the venture firm to put significant pressure on the CEO to hit these projections which just cannot be done. At iContact, we’ve always had aggressive projections (120% annual growth is always aggressive). But we’ve always been careful not to provide a Plan we didn’t think we could actually hit. I prefer to have plans that I’m 50% sure we’ll hit (expected case plans). Our CFO prefers plans that he’s 75% sure we’ll hit. He’s usually right.
24. Know Your Net Lifetime Value. Quick–what is the value of an average customer to your business? Don’t know? Ha–what type of entrepreneur are you? Seriously, come on. You better know this. To calculate it, take the average purchase price x the number of times a customer will order from you (over the average length of time they’ll be a customer). This will be your lifetime value (LTV). Then multiply your LTV by your gross profit margin % (Revenues minus Cost of Goods Sold) to get your Gross Lifetime Value (GLV). This is the very maximum amount you can spend in advertising costs to acquire a marginal customer and still breakeven in the long run. Then multiply your LTV by your net profit margin % (Revenues minus all expenses) to get your Net Lifetime Value (NLV). This is how much profit an average customer will be worth to your business.
25. Never Ever Undersell Yourself. When I got started with iContact back in 2002 I was 18. I dreamed what I thought then was a big dream. We would build a company to $1 million in sales. Beyond that mark, I didn’t envision. When we reached the $1 million mark in September 2005, we had to re-plan and re-decide what we wanted to go after. When we began, I didn’t think it was possible that we would build a company to 150 employees and $20 million in annualized sales. I certainly didn’t think that we’d have a shot at building a company to 1000 employees with a billion dollar market cap. When I went out to raise venture capital the first time in November 2005, I undersold the company and undersold myself. My goal wasn’t BIG enough HAIRY enough or AUDACIOUS enough. I knew deep down in my soul we’d get there but didn’t know HOW. Because I didn’t yet know exactly HOW I didn’t share what I knew we were going to ma ke happen. We didn’t get a term sheet from a number of VC firms then because I undersold what I knew we were going to make happen. I’m not advocating overselling either–just selling appropriately based on what you know if your heart of hearts you’re going to make happen. I’ll never undersell myself again. As my friend Elliot Bisnow likes to do, “Sell it big and then make it happen.”

I’m off to Charleston for a Renaissance Weekend. I hope you’ve enjoyed these lessons! Comments are very welcome!

Financial Markets: 3 Predictions | Dare Mighty Things

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I may be wrong, BUT…

(Update 4/1/2009 – Wow, was I wrong or what! I’ve learned a lot.)

1. This is the End of the Financial Crisis–

This is the end, not the beginning, not the middle. AIG will likely get a $85B-$90B bridge loan from the Fed backed by company assets in exchange for a majority stake in the company. The Dow will continue its rise in the morning with the news of AIGs stabilization. Based on March market capitalization, AIG It is five times bigger than Lehman. AIG is the 13th largest company in the world according to the Fortune 500 versus 37 for Lehman. It is an insurance and annuities company mainly and not a broker. It affects Main St. Americans much more than Lehman did. It can’t, and won’t be liquidated.

2. Oil Is At a Bottom–

Oil is at its bottom. Remember $88.90 per barrel, the bottom today before it started rising at 2:30pm. It is the lowest we will see a barrel of oil sell for in the next fifteen years until sustainable energy technology (“ET” as Friedman calls it, “ST” as Sachs calls it) creates green power at a price/KWH that is lower than fossil fuels can and transportation fully converts to electric ( reducing global demand for oil significantly and possibly reducing the price under today’s price). Oil will trend upwards, more slowly, toward $150/barrel by the end of the decade.

3. The Dow and S&P Have Reached Their Bottom–

The DJIA has reached it’s bottom. Remember 10,742.70, the bottom today at market open. It’s the lowest you’ll see the DJIA go in your lifetime. The underlying profits and productivity of American businesses are simply too strong to justify the S&P 500 the same level it was at in December 1998, nearly ten years ago when the U.S. GDP was 58% lower than it is today (8.7T vs. 13.8T).

This graph shows the S&P 500 at the same place it was in December 1998. Today’s bottom was 1174.

I may be wrong here, BUT… I sure hope I’m not.

The Influence of Hank Greenberg on the Fed

As an aside, Hank Greenberg, a WWII hero and the former CEO of AIG for 37 years, has had quite a bit of influence on the Fed policy vis-a-vis AIG it seems. I heard him on Bloomberg radio today sounding like Mikheil Saakashvili on CNN five weeks ago when Russia was “invading” Tskhinvali. Greenberg wrote earlier today in the Financial Times:

“AIG is not an ordinary company. It has opened markets all over the world and, for more than three decades, stood at the vanguard of the liberalisation of the global trade in services. Its stock is owned directly or indirectly by millions of Americans. And it has contributed significantly to US gross domestic product directly and indirectly over the four decades of its existence. But all that is not why it should be saved. AIG has a trillion dollars in assets. It can (and always has) serviced its debt. With the right leadership, it will continue to do so. Action is needed now: AIG needs immediate help, because the threat to our financial system is real. For that reason, if private capital cannot rescue AIG, a temporary federal bridge loan – not a federal bail-out – is in order.”

The 40 Business & Personal Lessons I Learned in 2007

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Personal Lessons

1. Life is precious and can be very short. Value it, keep things in perspective, and count your blessings. In February, I was driving down I-95 in Maryland in a snow storm on a Sunday evening trying to get back home to North Carolina when my car spun out after accelerating out of a toll booth area. I did a 180 degree spin, hit the front of another car, then continued another 180 degrees until I was straight again. My engine had cut off and I was drifting at 3-4 mph towards the curb when I realized a semi-truck was coming at my car. It missed me by about five feet. I really wanted to get back home that night so I could be at work the next morning but realized very quickly that it wasn’t worth trying. I sometimes can get wrapped up in what is next, what objective I am I pursuing now, and what appointments I have coming up. I realized it wasn’t really a big deal at all if I was stuck in Maryland for the night while the storm passed and missed a few things at work the next morning. I’ve also learned metaphorically not to accelerate in the snow without tread on your tires–you might spin out.
2. One can see much further if he stands on the shoulders of giants. I’ve been fortunate to develop a few great mentor relationships over the past year and added a few tremendous people to iContact’s Advisory Panel like Jud Bowman, Merrill Mason, Mike Doernberg, Mike Fitzgerald, and Buck Rizvi. I met Brett Icahn, Bill Clinton, and Marc Benioff during 2007 and learned from their wisdom.
3. It’s hard to stay in the game for very long when you’re not happy. Consistent hard and intelligent effort over multiple years is a key part of what makes a start-up succeed. It can be hard to sustain consistent effort for five, six, seven, or eight years. I’ve found that taking the time needed to make sure you are happy in what you are doing is an important investment. If you do not take this time you will generally not be able to last long. While I worked harder than ever before in 2007 (except perhaps in 2003 our first year), I’ve made sure I’ve taken time to build personal relationships, create memories, be with family, hold Entrepreneur and Social Entrepreneur meetups, read about the world, and speak to aspiring entrepreneurs–things that keep me happy and productive. I’ve found that I cannot help others if I am not happy and healthy.
4. I am an extrovert–I feed off the energy from others. I love to meet with and interact with passionate, driven people. I took a few MBTI-type tests in 2007 and in each one I was very much an extrovert. I refresh and get my energy by being around people. I do enjoy being alone in multiple-hour blocks in order to get work done, but as soon as the work is done I want to be around people again.
5. We are all humans and should stop killing each other. I find it difficult to understand why human genocide and warfare still happen in an age of easy communication. I will spend much of the rest of my life working to create stronger societies and reduce human suffering and end extreme poverty and war while creating access to education, healthcare, technology, and food. I became more committed to this life mission in the past year. There is absolutely no good reason in our world of opulence and riches that 26,000 children should die every day from preventable diseases and starvation in the developing world. We should have a global identity and stop create false separations and divisions.
6. The world has more opportunities than you might think. Sitting in a room planning to start iContact in 2003, Aaron and I could not and did not fathom we’d be able to create an 80 person company with a $10 million run-rate by the end of 2007. It was beyond my imagination. I am a very confident and goal-oriented person but could not even see beyond getting 2500 customers. We now have 18,000. Opportunities and possibilities will open up that today you cannot even think of today–if you just take the leap of faith and get started and keep at it. The opportunities get bigger and more interesting as your grow. If you are in business, you learn about raising financing, strategic acquisitions, convertible debt, private placements, private equity, and leveraged buyouts. As you add experienced people to your team that understand and have completed sophisticated transactions, many opportunities open up to you. The world of institutional capital is absolutely fascinating–and yet is almost off limits unless you bring someone onto your team that understands it or are able to build your company beyond a few million dollars in sales. At that point, they start calling you.
7. Keep associating with extraordinary people. I have been greatly helped by the relationships I’ve been able to make with people in New York, Boston, D.C., Chicago, Los Angeles, and San Francisco. For understandable reasons–I’ve found that large groupings of young, ambitious, extremely smart, passionate, dedicated people tend to live in major cities. I love North Carolina and hope to spend the majority of my life in the State. But there is no doubt at the moment that there is a brain drain of the best and the brightest to New York, Boston, D.C., and Atlanta after they graduate from UNC, Duke, and N.C. State. I started the Entrepreneur & Social Entrepreneur Meetups in June as one way to get smart passionate driven people who care about changing the world to associate with others who are similar and encourage them to stay in North Carolina after they graduate. The meetups have grown from 8 attendees at the Wine Bar in Chapel Hill in June to 60 attendees at my house of social entrepreneurs in Chapel Hill today. I’ve found that tremendously positive developments can occur when you connect smart people and when you choose to associate with extraordinary individuals.
8. Don’t write off dating women of any type. While in New York with a group of friends in February, I wrote off dating women who were older than I due to many of them wanting to get married right away. As soon as I did this, I met a wonderful 25 year old woman in New York who I learned a lot from and then began dating a 28 year old woman from North Carolina who I also learned a lot from. I was wrong to write off women who are older than I. I learned I could often relate better to women who were in the professional world already doing something to change the world versus in school. At a point during the Summer, seemingly not having learned the full lesson yet, I wrote off dating younger women due to not being able to relate professionally and often intellectually with them. At one point I decided to stop trying to actively date women seriously at all until I was older and could actually meet someone younger than I was who was making serious efforts to change the world and reduce human suffering. As you can predict, I of course was proven wrong again. The lesson I learned is that while I can develop helpful guidelines that are often true in regards to dating, I should not categorically write off women of any type. I found the chances just as high to meet a brilliant driven ambitious 20 year old as they were to meet a professional 27 year old who could care less about getting married right away.
9. Humans have a deep desire to be accepted for who they are and not judged. Being judged personally can have positive consequences such as getting helpful feedback or getting life guidance, but it can often hurt. I’ve yet to truly figure out and reconcile when it is a positive experience to judge another human and when it is best to simply accept them as they are. Perhaps the separating line may be in business versus outside of business. In business, judgment and guidance based on facts and metrics can be very helpful. Outside of business, I’ve seen that humans often want to be loved and accepted and not judged–at least before they are truly known by an individual. I admit I’m a bit confused still on this lesson, but I’ve learned it to be true in many cases personally nonetheless.
10. Gratitude is an extremely powerful character attribute. I watched the movie The Secret three times in 2007. While it has some seen some deserved criticism for being ‘over the top’ a bit, it nonetheless is one of my favorite movies of all time if not my favorite. The principles it shares are the exact principles I’ve used for the past six years and are the same principles found in Think and Grow Rich, one of the thirteen books that have changed my life since I was 17 (the others are Rich Dad Poor Dad, Rich Dad’s Guide to Investing, The Lexus and The Olive Tree, The Commanding Heights, The Spirit of Enterprise, The Worldly Philosophers, The End of Poverty, My Life, The Secret History of the American Empire, Understanding Power, Good to Great, and The Giants of Enterprise). One of the key principles of The Secret is the Attitude of Gratitude. Gratitude is such a tremendous power for good–and I’ve learned that in the past I have not shown nearly enough of it.
11. Humans have a deep desire for love and affection in their lives. It is so nice to have someone to make you eggs and toast (metaphorically). One of the nicest experiences I had in 2007 was when a women I was dating made me eggs and toast for breakfast in bed. It felt so nice to have someone to care about you in that way. I’ve found that this desire for human affection and love can sometimes cause someone to stay with an individual that is just not right for them in the long term, if that person does provide support and affection.
12. If you are going to meet someone for the first time, Google them first. Find a couple topics for discussion prior to meeting someone for lunch. Take five minutes to learn their background whenever possible. I have gone into a few of the business lunches I had in 2007 without knowing a thing about the person other than the company they worked for due to being rushed prior to lunchtime. I have made it a point to review my next day’s schedule before I go to sleep each night and do any needed research on people then–and this practice has been helpful.
13. My definition of love is different than that of most. I define love as a ‘deep personal care for an individual.’ Thus I tend to love anyone that I truly care about and very much enjoy spending time with. Thus I found it very possible to love multiple people at the same time. I’ve learned that many others feel that you can only truly love one person at a time. While I agree with this statement in terms of physical love, for me I find it possible to love two or three people at any one point in time. As this can often frustrate the heck out of women I’m dating, I’m trying to figure out a way to reconcile the many forms of love and express the difference between loving someone and being in love with someone, which may be different. I’ve learned that I have to be very careful and explicit in how and when I say I love you to a women because of this difference in definitions.
14. Be real, smile, connect. Don’t just talk about business. One of the most valuable lessons I learned in 2007 was that my natural ‘expressionless’ face often looks like a ’stone face’ and can intimidate people or make people think I am cold-hearted. I was completely unaware of this. I learned the lesson from feedback I received at the Grinnell Leadership Seminar in August in Chapel Hill. I learned instead to be real with people, relax, stop being so serious all the time, and to not just talk about business–to not act like the whole world is always on my shoulders. I also learned to let my free child out, live through my heart more often, and to ‘Ride the Dragon’ when times are difficult. I learned from my roommate James that I can often be very intense and serious immediately when meeting new people as I would immediately inquire about their passion and want to talk about business, current events, poverty, war, social entrepreneurship, politics, or religion rather than less intense topics like music, movies, food, or games. I’ve learned with the help of my friend John, the Grinnell group, and James to be less serious–at least initially when meeting people. I’m still working on getting rid of the stone face, chilling out more, and being more real–while still working hard and getting things done.
15. Share your passion with people. Another lesson I learned at the Grinnell Seminar was to share my passions with people. I often was afraid to share my passion with people in business settings due a feeling that it was not fully relevant to the business. My passion is learning about and working to reduce global poverty and human suffering both at home and in developing countries. On day three of four of the Grinnell Seminar we were asked to share our passion. They told me that when I did this my eyes lit up and I became real to them. I then learned the most important lesson of all–that they would much rather follow that passionate person with eyes lit up than the stone faced serious leader they were exposed to on days one and two. I’m still working on figuring how and when it is best to share my passion with others, but feel the mental freedom to do so has been a bliss.
16. Marriage is very rarely perfect. Growing up I believed marriage to be a union between two people who were destined to be together and that other than the rare argument, marriage was generally perfect. Seeing the interactions and hearing the stories of many married couples, I now know this to not be true and that a successful marriage takes at the minimum tremendous communication skills on both sides, generally overlapping life plans, and a willingness to compromise with one another.
17. Love and good health are the two of most wonderful things God created. While I believe the purpose of my life is to be happy, help others, and create further life–two of the absolute best things in this world are love and good health. Humans spend more time and money working to acquire and keep both than any other two substances. Love can surely move mountains.
18. A Great woman can make a huge difference to a Great man. I’ve seen this be true in many of the biographies of leaders, Presidents and Captains of Industry that I’ve read in 2007 and seen it true in my own life.
19. Don’t lead women on. Even if you don’t want to ruin what you have now, don’t lead women on. It’s mean and not worth it to do so. I’ve learned this lesson in 2007. I was hurt by a woman during 2007 who I felt led me on. After I could understand what it felt like from the other side it became easier to no longer do–though I still was by no means perfect. I’ve still struggled at times with avoiding this behavior, but I am committed to working on it and being as upfront as possible about feelings–or sometimes delaying sharing feelings until after I know they are stable. Often my feelings are not stable and are tied to how I feel at the moment rather than how I feel overall. I’ve worked on being able to discern which type of feelings are which.
20. Don’t ever let your mind limit yourself. Just because you can’t understand how you’ll achieve any great goal–whether it is to become a billionaire, end world poverty, find a soulmate, or become a global leader–doesn’t mean you should not set the goal. As you progress toward your vision you will figure out how. Man often overestimates what he can accomplish in one year but greatly underestimates what he can achieve in five, ten, and twenty years.

Business Lessons

1. I have to solicit cross-team input in order to get it. I’ve learned that input and feedback from team members has tremendous value and have learned that it is often difficult to get enough of. I learned to proactively seek it through surveys, skip-level meetings, and pulse-check lunches, discussions, and coffees with different staff members. I found that the best ideas very often come bottom-up.
2. A percentage of people will always criticize you regardless of how you perform. I learned in 2007 that regardless of how well you are performing, a small percentage of people will always be critical of you. In the political world, if you can achieve a 60% approval rate you’re doing a tremendous job. It is very difficult to operate in a world in which 40% of people don’t approve of what you are doing–but I’ve learned it comes with the territory of a leader.
3. Stop worrying so much about what people think of you. Just be different, work hard, and get results. Be concerned with what you do and make sure it aligns with your values and principles, but don’t spend endless mind cycles worrying about what people think.
4. You need to have thick skin and persistence to succeed in this life. I learned from my friends Carolina that you must be direct and upfront with people to get what you want in life. I’ve learned through my friend Joktan and my CFO Tim that you often have to negotiate what you want in life. I’ve learned further through enduring criticism that one must have thick skin, perseverance, and persistence to succeed. There will always be someone coming after you.
5. Our team is extremely valuable to the company. In the beginning it was just me and Aaron. Then we added Josh, David, David, Brad. Today we have 80 team members and are growing. I’ve learned that the value of our team is immense. We have made many investments in better benefits, more vacation time, stock plans, and conscious culture-creation for the team and every time the investment has paid off in creating a family that is happier and more productive.
6. Slow times should scare you. While slow times are rare at iContact these days, in the past few years we have had 2-3 slows times that I noticed–periods of 3-4 weeks in which not very much was happening either due to Holidays, vacations, product cycles, or coincidence. In every case, we’ve had an issue underneath the surface that came out as soon as the slow time ended. I’ve learned that whenever I feel there is a time that is slower than usual, to work extra hard and spend and extra time listening to what’s going on at the staff level of operations.
7. Randomly tell people that you appreciate them, that they are doing a great job. People don’t get enough praise. When someone is doing a job well, mention it to them. Don’t let your only interactions be interactions in which you suggest different behavior.
8. Attack issues head on. Be direct and communicative, not passive aggressive when addressing issues. Take a couple minutes to think then act immediately. I took the time to have a three hour late-evening meeting with my partner Aaron in May to clear up some issues we were miscommunicating about before an early morning flight to New York the next day. Holding that meeting was very helpful to our alignment and continue positive interaction. While I’ve not always been successful in doing this, I’ve learned to take the time to meet with people in person to clear up any issues as soon as you detect there may be an issue.
9. It can be very helpful to fundamental investing results if you have an understanding of global macroeconomic trends and causes. Understanding why currency values, interest rates, and commodity prices fluctuate has been very helpful in determining which personal investments to make. The basic lesson that when interest rates go down in a country while a budget deficit rises, currency values will also go down in a country has made Warren Buffet quite a lot of money in the past two years. The great value of a liberal arts education in hindsight is that you can more easily see the bigger picture of how the world operates. Markets are by no means efficient and he who has a perspective that others cannot see will be able to produce premium returns. Now if I could only predict where oil will be in five years. A financial planner friend of mine thinks it will be at $60 per barrel due to the large supplies currently being found and the lag between the time higher prices cause higher technology investment and when higher tech investment causes an increase in supply. Personally, I don’t see any way the price of oil will do anything but go up in my lifetime with a limited supply and demand that will increase many times over before we are able to greatly eliminate dependence on oil as a source of energy.
10. It can be very helpful to fundamental investing results if you can have advisors that set policy on your team. By watching a documentary on the Carlyle private equity group I learned that you can get great returns if you know what the policy and government interaction is going to be on highly regulated industries like defense in advance and you have former Presidents and Secretaries of Defense and State working for you.
11. Don’t make people feel like you are going around them. Skip-level meetings are often very helpful (where you meet with people who don’t directly report to you in order to get a better pulse on the business) but be sure to explain to the person who reports to you that you are theoretically going ‘around’ why you are doing what you are doing and that it is not caused by anything they are doing wrong. Unless of course it is–in which case you need to talk to them about what’s going on right away anyway.
12. Don’t make people feel you are consulting others about their field without them. If you are going to consult with someone outside your company about a topic you have someone in charge of, tell the person in charge of the department what you are doing and why in advance and either invite them to join you or meet with the person afterwards or explain your reasoning why you’d rather meet with the person alone.
13. Speed of implementation matters. Cutting just a day off each stage of a project can save a week of time or more by the time a project is done. Weeks of time saved can greatly increase customer acquisition and internal efficiency. Encourage your team to get one additional thing done before they leave in order to reduce time delays from projects. The very large majority of ‘real hours’ (versus ‘human hours’) spent on a large project is time waiting on persons to review, approve, or provide the next part of the project. It can take many extra weeks to complete a project that only requires only a few hours of human effort if each phase waits in the inbox of an individual for three days instead of two.
14. Take the time to explain to people how your thinking process works. I once felt that because I was CEO I was justified in making small decisions (like the background color or text font face on a web page) without taking the often extended amount of time needed to fully think through and explain my reasoning. I learned that while I may have been justified, I found that things would get done better and more effectively if I did take the time to think through and explain my reasoning fully.
15. Always create a competitive round when you are raising VC. Work to get multiple term sheets when you raise venture capital. Our pre-money valuation increased a full 50% from when we received our first term sheet to when we received our fourth a couple weeks later in May. There really isn’t an easier way to create perceived value than to get competition in a round. If you can create a parallel process and receive multiple term sheets you will have more power. Group mentality does at times take hold, causing the valuation to be bid up with multiple players in the deal and some of the secondary terms to be softened.
16. Have comparables ready when talking valuation. Be prepared with revenue multiples from both public companies that are similar to yours and private comparables. Depending on many factors (team, technology, industry stage, revenue growth, market size) one can expect to be able to raise funds at 2x to 10x your revenues from the trailing twelve months or 1x to 4x your projected revenues from the next twelve months. If you don’t have any revenues yet, the valuation will be whatever you can negotiate with an investor and based upon your experience and any intellectual property you have. At the end of the day, the market valuation for your company is what an investor is willing to pay—and as such it is important to have multiple firms competing to invest in your firm if possible. Depending on the stage of your company, you may be able to raise funds at a 30% to 70% discount off the public market trailing or forward revenue comparables.
17. When giving VC presentations, prepare well and give a knockout presentation.. Invest in a graphic designer to make your presentation look nice and go heavy on actual examples of customer use and light on complex slides. I have seen a short flash product demo video or customer video interview within the presentation work well. Don’t let any slide have more than five bullet points or fifty words.
18. When negotiating raising investment, have a top tier legal advisor on your side. Once you receive a term sheet, have your attorney review it right away and provide feedback before you discuss it with the investment firm. Your negotiating power will be based upon how much you need the money, the reputation of the firm, your reputation as an entrepreneur, any past successes you’ve had, your experience, the quality of your management team, the members of your advisory panel, the size of your addressable market, your market timing, the quality of your technology and IP, your ability to walk away; and whether you have other competing term sheets.
19. Make sure you know which terms are important to you in term sheet negotiation. Generally the valuation, option pool size, liquidation preference, participating preferred, founder revesting, and preferred stock veto rights are the most important terms to negotiate. You may wish to have your attorney or CFO if you have one negotiate the finer points directly with the firm’s attorney.
20. The investment firm providing the highest valuation isn’t always the best firm to work with. I learned that there are many important factors in a venture capital deal. The most important is not the valuation, but instead whether you have good chemistry with the firm who wants to invest and in particular with the person who would be joining your Board of Directors. You will create, or destroy, much more value in the years following the investment by having the right person on your Board and the right firm backing them than you will by going with the firm that provides the absolute highest valuation possible. The other downside of pushing up the valuation beyond what you feel is fair is that the ‘winning’ investor will often ride you much harder to justify their higher purchase price–often creating lots of stress that simply is not worth the cost.

Quotes from Day 2 at Altitude

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Another great day at Altitude. Here are the quotes from the day that Eben highlighted:

“Opportunities multiply as they are seized.” – Sun Tzu

“Next to knowing when to seize an opportunity, the most important thing in life is to know when to forego an opportunity.” – Benjamin Disraeli

“The essence of genious is to know what to overlook.” – William James

“It is better to be first than it is to be better.” – Al Ries and Jack Trout

“As I grow older, I pay less attention to what men say. I watch what they do.” – Andrew Carnegie

“Data is most valuable at the point of origin. The value of data is directly related to its timeliness.” – Lawrence Miller

“When you have mastered the numbers you will in fact no longer be reading numbers, any more than you read words when reading books. You will be reading meanings.” – Harold Greene

I actually got more work done today than I do in a normal day in the office with 88 emails sent and a number of key projects worked on.

13 Lessons I Learned in 2006

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1. Yes And Life
   One of the key lessons of improv is to say yes to the scene that your acting partner is creating. If your partner suggests you’re kissing cousins in a ski lodge, then you are kissing cousins in a ski lodge AND something else. By saying yes, and in response to people instead of no, but you often create better outcomes and build a much stronger relationship with the person you’re interacting with.

2. Judging People is Necessary
   As a child you learn never to judge people. Judging people perhaps even has a bad connotation. But in business, you must judge and you must judge often. You must judge based on intelligence, effort, and more importantly results. If you don’t judge, you end up with unexamined, unmeasured mediocrity. All humans have equal inherent value, but not all humans’ productive efforts are equal.

3. The People You Surround Yourself With Matters
   Venture Capitalist Steve Nelson shared some advice with me this year that has stuck with me: Stay involved with only the best. Ask yourself – are these outstanding people? To know, you only need to ask yourself: do they possess great intelligence, keen business insight, outstanding people skills, and unquestioned integrity?”

4. Life Reveals The Rules Only After You Start Playing
   Life is a game; and a game that doesn’t exactly reveal most the rules until it’s been played a few times. There are two ways to figure out the rules– a) talk to smart people who have already done what you’re trying to accomplish or b) trial and error. Either way, start playing early.

5. If Somebody Sues You, Go Talk to Them in Person
   I spent about $35,000 unnecessarily this year by listening to my lawyer and not communicating with a former client that was bringing Virante into arbitration. If I just would have flown out there and spoken with him in person initially instead of 4 months later at the mediation hearing I likely would have saved that $35,000 and a lot of personal stress. The lawyer’s advice was correct and proper legally, but the ‘legal’ solution often costs a lot of money to get to.

6. Build Consensus with the Core Before You Present Widely
   Build pre-emptive support and communicate your vision individually to your Executive or Director team or in small groups to get feedback and adjust before presenting to everyone. This can be a lot of work, but it’s how it is done in companies larger than 20 people.

7. Life is Too Short to Not Be Passionate About What You Do
   Stand out, make an impact, be compassionate, and help others. Too much injustice occurs in this world to not want to make a positive change at whatever level you can. Torture, human slavery, murder, genocide, starvation. Too many people don’t have the opportunities we have, and too many people die needlessly from preventable diseases and starvation to make you not want to do the absolute best you can in your life. Have fun. Enjoy life. Help others. Reduce suffering. That is the credo.

8. There Are Four Must-Attend Conferences for Future Leaders
   This year I sat next to John McCain and talked about soccer and energy policy as we watched the semi-final of the world cup for 15 minutes. I had a conversation with Madeleine Albright about security and aid policy in Africa. I talked about digital camera technology riding on a bus next to Steve Jurvetson on the way to Michael Eisner’s ranch. I sat next to Glenn Close, Sandra Day O’Conner and Stelois Ioannou in a roundtable discussion on climate change. How’d I get there? Five years of consistent hard work and getting invited to attend a conference called Fortune Brainstorm. By getting invited to and attending a few key conferences you can have access to pretty much anybody in the world. In my experience so far, those key conferences are Fortune Brainstorm, The World Economic Forum, TED, and the Clinton Global Initiative Annual Meeting.

9. There’s A Good Deal of Corruption in the World–It Can Affect Policy–And Competition Can Reduce It
   In 1995, the telcos had the technology to launch DSL. But they held off for nearly five years. Why? Because the cable companies didn’t yet have the technology ready to launch cable modems and the telephone monopolies saw hundreds of millions of dollars of second-line dial-up revenue from their subscriber base. Instead of providing DSL to Americans and allowing economic-enhancing broadband access, they (somewhat understandably perhaps) held back the technology to make more money, in the mean time using their huge lobbying base to ensure governmental policy wasn’t enacted that would benefit all other businesses, all consumers, and the entire economy. Finally, in 1999 the the technology for cable modems became ready and marketable and amazingly, DSL launched. The lesson perhaps is that while business in general and consumers in general should have the right to lobby and influence, a single industry should never have the power to lobby at the expense of the wider good.
   
   
   
10. Compounding Experience & Compounding Resources Allow For Greatness Over Time
    The big wooden flywheel from Good to Great has held true in my business experience. It takes a long time to get the flywheel moving at all. It takes a lot of really hard pushes to get it going. Each individual push doesn’t move it very much. But if you keep pushing, eventually the wheel starts moving and inertia and momentum start to take hold, causing each subsequent push of equal strength to have a greater and greater impact. In 2003, Broadwick did $12,000 in sales. In 2004, $296,000. In 2005, $1.3 million. And in 2006, $2.7 million. We worked from October 2002 until December 2003 to generate $12,000 in sales (and $20,000 in expenses!). We worked equally as hard in 2006 as we did in 2003, but instead of $12,000 we generated $2.7 million with the same effort. Intelligent consistent effort compounds as experience, knowledge, and access expands. Sometimes it is difficult to fathom how people like Rockefeller, Carnegie, and Morgan acquired their fortunes and made the impact they did in one lifetime. They started by working their butt off to make $12,000 and forty years later they were working with hundreds of millions. Same way Buffet did it, same way Gates did it. Play life like a long-term game. And always be improving.

11. Networking Isn’t About Handing Out Business Cards
    In every personal development conference you go to you hear that networking is key to business success. And that is in fact true. But most teachers leave out the most important rule of networking. It’s not about shaking hands, having a little small talk, and swapping business cards. It’s about building real, trusting, mutually giving relationships with quality people.

12. The World Has a Lot of Problems, But They Are Fixable
    One of the reasons I want to be a U.S. Senator one day is to be able to influence foreign policy, especially the policy that deals with how our country interacts with other countries from an economic and environmental standpoint. This year, I’ve been made so consciously aware of the extreme inequities in the world today. 49,000 people die per day from preventable disease and starvation, 2.7 billion people live on under $2 per day, most people don’t have the opportunity to be creative through entrepreneurship due to class-divisions and bureaucratic restriction, the developed nations produce an uneccessarily large amount of greenhouse gas causing agricultural famine in non-developed nations, billions of dollars go to farm subsidies in the U.S. and E.U. creating silos upon silos of wasted grain while millions die of starvation due to lack of access to markets in developing nations, tens of thousands of humans remain in sexual or work slavery. I have been deeply affected by these issues in 2006 and hope to be able to dedicate much of my life the best way I know how doing my best to improve these situations on a global scale through politics, business, and social entrepreneurship.
13. Community Matters
    And yet, for every thought I have about Malawi, Benin, or Burundi, I think about North Carolina. For every issue in Malawi, Benin, and Burundi, I can see a parallel issue (though at a different scale) here in North Carolina. A lack of equality of opportunity in Malawi can be paralleled to a lack of educational equity here at home. Most North Carolinians know that our K-12 educational quality has not been on par with that of other States’ in the past, especially east of I-95. I applaud Governor Easley’s efforts to improve the situation as well as the measurement and tracking work the North Carolina Progress Board is doing and am hopeful for continued improvement. I was thrilled to meet with members from the Institute for Rural Entrepreneurship in November and to become a donor to the Council for Entrepreneurial Development this year and am hopeful to be able to work within the communities of North Carolina for decades to come. The Lesson: While you should always educate yourself about the world, what happens in it, and how you can make a global difference, you can most often make the largest difference right at home–and there are always plenty of issues (read: opportunities to improve) right here in our own community.

The 20 Most Important Business Lessons I Learned in 2005

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Near the end of each year, I always create a Year Review document in which I list memories from the year, new people I’ve met, the progress I’ve made on my goals, business results, and the most important business lessons I’ve learned. Per my 2005 Year Review, here are the twenty most important business lessons I learned in 2005.

1. Listen to that little voice in the back of your head. It’s usually alerting you to something that might come back to bite you if you don’t listen to it.
2. Don’t let non-communication lead to the de-generation of a relationship.
3. Full-on bias toward action is great. But only when you have little to lose. Once you have something to lose, you must balance having a bias toward action with analysis, due diligence, and care.
4. Don’t avoid doing things just because they are hard or may cause conflict.
5. Consistently look for bottlenecks and inefficiencies in communication flows and organizational behavior.
6. Integrity is what matters at the end of the day. There will always eventually be an audit or a lawsuit that has to look into what you’re doing RIGHT NOW. So make sure at all times your actions are above board and in good faith.
7. The business world can be harsh and often times there is someone in your life that you trust that you should not who will eventually try to screw you over.
8. As CEO, if there is a layer of management between you and the person you need to speak to, speak to that person’s manager first to make sure it is okay to speak with him or her or just relay the message through that person’s manager.
9. As CEO, try to avoid assigning work to people you do not directly manage to avoid priority conflicts. Rather, in all cases except emergencies give the task to that person’s manager to assign.
10. Recognition and praise can be just as big of motivating factors for employees as salary and bonuses.
11. Finding the right people when you need them is a significant challenge and can take longer than you would think.
12. Always communicate openly, fully, and quickly with your customers during any negative events.
13. Quality assurance is a critical part of the software development process. Don’t release a new version of your product until it has been thoroughly tested by both an in-house QA team and a subset of your customer base. Bugs that make it into a released version are much more costly both in lost sales and loss of brand goodwill than spending the money needed to fix them up front.
14. Raising funding for a company usually will take longer than you expect.
15. Make the call. It’s often better to call than email if you’re trying to get a project done quickly.
16. It is better to prepare for the worst when things are going well rather than when they’re not.
17. Sometimes you just have to let go. Get the right people, train them, and then trust them.
18. Just because you have a detailed plan in your head doesn’t mean other members of your team know it. If you don’t consistently communicate your vision and plans, people may think you don’t have vision and have failed to plan.
19. Be very nice to merchant account processing limit review officers and give them the information they need to review your limit well before you hit it.
20. Building a business is truly like trying to push a big horizontal wooden wheel. It takes hundreds of small pushes to get it moving, and hundreds more to get it going quickly, but once you get it going quickly inertia starts to take over and your continued efforts have a greater and greater effect.

The 20 Most Important Business Lessons I Learned in 2005

Near the end of each year, I always create a “Year Review” document in which I list memories from the year, new people I’ve met, the progress I’ve made on my goals, business results, and the most important business lessons I’ve learned. Per my 2005 Year Review, here are the twenty most important business lessons I learned in 2005.

1. Listen to that little voice in the back of your head. It’s usually alerting you to something that might come back to bite you if you don’t listen to it.

2. Don’t let non-communication lead to the de-generation of a relationship.

3. Full-on bias toward action is great. But only when you have little to lose. Once you have something to lose, you must balance having a bias toward action with analysis, due diligence, and care.

4. Don’t avoid doing things just because they are hard or may cause conflict.

5. Consistently look for bottlenecks and inefficiencies in communication flows and organizational behavior.

6. Integrity is what matters at the end of the day. There will always eventually be an audit or a lawsuit that has to look into what you’re doing RIGHT NOW. So make sure at all times your actions are above board and in good faith.

7. The business world can be harsh and often times there is someone in your life that you trust that you should not who will eventually try to screw you over.

8. As CEO, if there is a layer of management between you and the person you need to speak to, speak to that person’s manager first to make sure it is okay to speak with him or her or just relay the message through that person’s manager.

9. As CEO, try to avoid assigning work to people you do not directly manage to avoid priority conflicts. Rather, in all cases except emergencies give the task to that person’s manager to assign.

10. Recognition and praise can be just as big of motivating factors for employees as salary and bonuses.

11. Finding the right people when you need them is a significant challenge and can take longer than you would think.

12. Always communicate openly, fully, and quickly with your customers during any negative events.

13. Quality assurance is a critical part of the software development process. Don’t release a new version of your product until it has been thoroughly tested by both an in-house QA team and a subset of your customer base. Bugs that make it into a released version are much more costly both in lost sales and loss of brand goodwill than spending the money needed to fix them up front.

14. Raising funding for a company usually will take longer than you expect.

15. Make the call. It’s often better to call than email if you’re trying to get a project done quickly.

16. It is better to prepare for the worst when things are going well rather than when they’re not.

17. Sometimes you just have to let go. Get the right people, train them, and then trust them.

18. Just because you have a detailed plan in your head doesn’t mean other members of your team know it. If you don’t consistently communicate your vision and plans, people may think you don’t have vision and have failed to plan.

19. Be very nice to merchant account processing limit review officers and give them the information they need to review your limit well before you hit it.

20. Building a business is truly like trying to push a big horizontal wooden wheel. It takes hundreds of small pushes to get it moving, and hundreds more to get it going quickly, but once you get it going quickly inertia starts to take over and your continued efforts have a greater and greater effect.