I am Geekwire's Geek of the Week. Check it out here. Outside of the self-promotion, my real sincere ask of all of you entrepreneurs is to truly enjoy the moment. Its too easy to worry about the next play or the next thing without basking in the moment. Onward and upward!
January 26, 2017 | Permalink
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I’m a fan the classic Chevy Chase film, Fletch. If you haven’t seen it, the eponymous hero classically tries to bluff his way through pretending he's an aircraft mechanic. At one point in the film as he attempts to maneuver his way through an inspection of a plane engine, he cunningly delivers the line, “It’s all ball bearings nowadays!” And all too often I often feel like Fletch when it comes to DevOps. Software today is componentized, agile, and it's a market that’s flooded with a seemingly endless amount of service providers.
What this post is not is a list of software recommendations. There’s interminable detail and knowledge that’s above my paygrade on this subject, and a never ending list of services available. What this post is, is an overview of the DevOps landscape today and its impact on the software industry as we know it.
In general, here are the main components to dev ops:
I reached out to a friend of mine who's a senior DevOps talent working at Digital Ocean. I wanted to learn more so he sent me a ton of helpful, must-read articles and videos. I found a ton of inspiration from these resources so I thought I’d package up this content for anyone that's interested in this subject:
This is by no means a comprehensive list of DevOps resources, but hopefully the curation inspires you to learn more.
Travel is huge, but where is the corporate travel innovation?
Travel is one of those monster categories that never ceases to innovate. The global category is over $9 trillion and online travel is over $300 billion . Just when you think that there isn’t any more innovation, another new startup takes on a new twist to this mongo market. It reminds me of the patent off quote that “everything that can be invited has been invented.”
Years ago I had the good fortune to join Expedia. Actually, it was over 15 years ago and I got to see the early stages of the now prominent and established online travel market. Where size and scale win the day, we’ve seen the dominant players continue to eat up more demand and supply sources. They control their own destinies from both the core travel suppliers like air, hotel, etc. (who are always trying to disintermediate them), as well as upstarts.
One market that I helped launch from its infancy was the online corporate travel business; Expedia Corporate Travel, now known as Egencia. If you think about half the travel being business travel, one would expect to see more innovation in this space. As part of my role as an advisor and EIR at Voyager Capital, I see many travel deals but not that many business travel plays. In fact, I’m on the Board of Yapta which pivoted from a consumer-based business (focused on airline fare tracking) into a corporate travel technology play. Today, Yapta manages and monitors millions of flights in order to save corporations money on their T&E programs.
So the question is, why isn’t there more innovation in business travel? Keep reading...
Corporate travel is big, but it’s like The Game of Thrones
I say it’s like the Game of Thrones because the spend is controlled by a small number of players called Travel Management Companies (TMCs) that are constantly focused on becoming more powerful through increasing the overall bookings that they manage.
In my recent post, I talked about the corporate travel market and the lack of overall innovation. The main issue with the travel industry, and the associated opportunity, is that it’s extremely slow moving with laggard players and technology.
The traditional leisure travel business has been devastated by consumer side companies who have made easy to use, self-service tools available to anyone online. Over time, those players continued to bulk up their market share in order to get favorable back-end revenues as well as more balanced sheet leverage with the travel suppliers. M&A has been a necessity for the intermediaries like Expedia and Priceline in order for them to continue to bulk up in the market share arms race. Priceline’s market cap is ~$66B of of ~$10B in revenues and $3.7B in EBITDA. Expedia’s market cap is ~$16 of of ~$7B in revenues and $.8 in EBITDA. In the consumer space, you can gobble up consumer eyeballs through direct marketing and M&A, but the corporate travel space is much different….
The corporate travel market size is super huge. The Business Travel Association pegs it around $260B in the US (which the graphic is based on below) and its much larger worldwide. Here’s a break-down:
This image is basically right. I pulled some additional data from the business travel metrics online, but the main takeaways are:
Want to see a list of some of the top corporate travel spenders? Check that out here: http://businesstravelnews.texterity.com/businesstravelnews/september_28__2015?pg=6#pg6
This number doesn’t include the lightly managed business travel; travel that’s booked outside of your official corporate travel program. You know, like seeing a rate on a consumer site and then booking it directly.
It’s simple, right? Go after the top enterprises and close them just like a consumer business. As the reader may know, corporate spend is largely managed by travel management companies (TMCs). TMCs are largely system integration companies that have a series of travel related services (agents, credit card reconciliation) combined with largely 3rd party software. T&E is typically around 1% of a companies cost and these TMCs act as an integration point for managing everything travel related for a business. More on them in another post.
The key is that the corporate traveler is largely being managed through a travel agency and is using those services to book travel. Thus, while this market is big, you as the budding entrepreneurs, need to realize that these TMCs control much of the technology and service decisions for corporations.
Corporate Travel Economics
As I mentioned in the previous section, Travel Management Companies control the majority of travel spend for business travel. In fact, the largest TMCs control ¾’s of the gross bookings market with the top six agencies (American Express, Carlson Wagonlit, Egencia, etc.)
Back in the glory days of travel, there was a lot of money to be made from both fees to consumers/companies and from back-end commissions. Back-end commissions were made up of commissions off air, hotel and car suppliers as well as GDS rebates (commission paid for using one of the reservation systems like Sabre or TravelPort).
Today, most TMCs make their money from fees. There is still some commission to be had but primarily TMCs have lost most of that revenue. Most corporations have eventually negotiated any back-end revenue to flow back to them or they pass through as savings to the corporation. In the case of Egencia/Expedia, our strategy was to use Expedia's scale in Leisure to basically have TMC-level negotiating power. That way, we could offer low transaction fees while actually making more from back-end revenue.
Another important point is that TMCs typically don’t have their own technology. At Expedia/Egencia, our strategy was to have high online adoption of our product because we didn’t rely on licensing costs for the technology. TMCs typically license software from vendors like Concur, so as bookings moved to online versus calling an agent, TMCs become more disadvantaged. Today, TMCs are still in this pickle of not being great at technology. I’ll post some more thoughts around the implication of technology and TMCs in another post.
My numbers may not be completely accurate but they are directionally correct when looking at a TMC’s per transaction economic breakdown:
|Revenue||$ 25||$40||*mainly fee revenue, small % of back-end|
These numbers are definitely not software margins. Once you load in the fixed costs of these businesses, you are looking at 10%ish profit margins. American Express leverages travel as a strategic component to their card business and will rebate corporate clients for use. Otherwise, these businesses are about huge topline in gross bookings and low profit margins.
When working with a TMC, you have to understand their strategic and economics motivations. The incentive for TMCs is to have as much ‘touch’ or human interaction with the trip/transaction as possible. The reason is that since the TMC doesn’t make much revenue on back-end fees, they want to make sure they offset these costs from agents. Technology can mitigate much of this cost and it does in the case of Egencia and Concur for online books.
TMCs like fees. In fact, they need fees from everything from waitlists, voids, exchanges, etc.
Where does corporate travel go?
It hasn’t changed that much since I had been involved with it.
Longer-term, TMCs have to think about how to become relevant as new supply sources and new technologies (like Uber, Airbnb, etc) put further pressure on TMCs as the main arbiter for corporate travel control and spend. Much to my surprise though, these changes are slow and I would have have guessed that TMCs would still have such a large hold in the market today. Steve Singh, co-founder and CEO of Concur, once told me that the biggest competitor in the business travel and expense space is change – moving from the old thinking and into a more efficient world.
From my previous post, we covered the per unit economics of TMCs. For budding entrepreneurs, you now have a good sense of how you can craft a direct or partner strategy based on the service or offering that you are building.
The elephant in the room is Concur. Concur is a friend and a potential enemy to TMCs. Their open booking strategy certainly scares the TMCs and Concur doesn’t have agents and never will. Their platform can do everything. Although, they would never have a call center or other call agent services. Who knows with travel bots thought.
Again, I haven’t seen a lot of new innovation in the space but here are some entrepreneurial ideas that might be interesting got pursue below:
A big addressable market should have more innovation. Its ripe for the taking!
I recently spent some time with a Seattle-based venture capital firm, Voyager Capital. Voyager is an early-stage venture firm that focuses on B2B opportunities primarily in the Pacific Northwest. What drew me to the firm is their very different approach to supporting entrepreneurs. They have a craftsman-like view for their investments, bringing in outside resources like Tom Kippola from the Chasm Group, Bruce Chizen former Adobe CEO, corporate coaching and on-boarding services from the Nofsinger Group. They should be on your list of firms to contact if you’re raising your first institutional round of financings. They've recently had some big exits such as Elemental Technologies to Amazon for ~$500M, and BlueBox to IBM.
OK, done with the plug.
A lot of people have asked me what it’s like to be an entrepreneur-in-residence (EIR). First, here is some definition around it. An EIR is typically a position that is given to a seasoned executive that is either a) trying get a new company off the ground within a VC firm or b) wants a platform to see deal flow where they can join a new early-stage company. The VC hopes that the EIR decides to join one of their portfolio companies.
The roles and responsibilities can vary greatly by different venture firms. In fact, the role and the compensation doesn't really have a standard best practice across firms. Here are some high-level ideas on what they do:
1. Compensation- some positions are paid and others are not. In addition, you have an opportunity to get adviser stock in addition to spending time with the VCs portfolio companies.
2. Roles - typically you are spending time doing the following:
a. Diligence - depending on your expertise and background, more than likely you will be asked to weigh in on potential investments. You could be asked to be present in the office, email, etc. Again, there is no standard practice. If you ever wanted to peak behind the curtain on how a venture capital firm works, these types of tasks become really fun.
b. Deal flow - the life's blood of a venture firm is deal flow. If you consider that 1% of the total investments that you are evaluating are successful (it fits your profile and you were able to have a signed term sheet from the entrepreneur), you've got to have a ton of deal flow. An EIR isn't a VC nor an investment professional. And while you should bring in deal flow, I wouldn't say that an EIR should be expected to bring in as much as the venture professionals.
a. Efficiency - you get maximum efficiency when looking at companies. Instead of hanging out at a Starbucks all day, you can meet a lot of interesting companies as they filter through the venture office. If you are interested in finding a new role, this could be a beneficial.
b.Playing “VC" - if you are interested in being a venture capitalist, it is a good way for you to see how the back-end interworkings of venture capital work.
c. Getting sharp - as an entrepreneur, you are very focused on being focused. You are laser-beam focused on your venture and, quite frankly, don't have a lot of time to think about other categories and opportunities. Like a VC, as an EIR you get to be horizontal from an investment perspective. You can be looking at virtual reality in one meeting, then e-commerce, throw in some travel, and, heck, add a dash of marketing SAAS -- all before noon. So you get a perspective of models and overall business assessment, while also picking up pretty good deal pattern recognition where you can evaluate an entrepreneur and their business very quickly. All good things to have whether you’re an operator or VC.
If you want to play like you are VC while staying active when looking for your next opportunity, I would highly recommend pursuing it.
January 18, 2016 | Permalink
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I recently did a post back in April for VentureBeat titled 5 Reasons Your Business Plan is Becoming Obsolete. In that post, I point out how easy it is get a new business idea or startup tested and vetted without much upfront investment. Many of these themes have honestly been discussed before in other books and posts. I must say that writing about the “minimally viable business plan” got me looking at various products and tools to get your online business up-and-running. There truly is no more excuses to not build a business online anymore - the tools are so easy and you simply have to have the will and passion to put the time and effort into your endeavor.
As every good Ivy League MBA-turned business executive will tell you, the secret to successful startups, rapid early-stage growth, and profitable empire begins with a solid business plan. But lately, scrappy and innovative entrepreneurs are bucking the trend and adopting new forms of growth hacking, and we’re starting to see them change the way businesses are born, grow, and thrive. And compared with their predecessors, they’re knocking expectations and ROI out of the park.
Old-school innovators should take note, or run for their lives (or the lives of their businesses anyway). This new breed of anti-business plan entrepreneur has discovered the new toolset that gets them from proof-of-concept to customers and funding in ways never before seen in the business and investment communities. These mavericks are beating out their competition, one click at a time. Their success can be summed up by the age-old adage “actions speak louder than words,” and in today’s world that has never rung more true for businesses. Here’s why:
•MVB is the New MVP. While the concept of minimum viable product is standard business practice across most industries, today’s fastest moving new ventures are now launching minimum viable business models. Although this approach at first blush may seem haphazard and half-baked, in a market that changes by the second (and by the click), MVB companies are free to evolve as consumer demand and conversion data dictates.
•If they come, you will build it. Gone are the days where you need product in hand to snag the sale. Turning conventional methodology on its head, today’s anti-business plan innovators are selling benefits now and building features later. And with today’s pre-sell process quickly becoming the norm, customers have skin in the game and can help mold your product into a successful solution that fits their needs.
•Instant access to A-players. Specialized, skilled workers used to be hard to come by. Not anymore. With outsourced staffing sites like oDesk, Elance, and Fiverr, businesses have access to a specialized, global workforce at their fingertips that’s no longer limited by the constraints of a zip code. New ventures no longer need to worry about building in salaries and benefits for full-time employees to get their startups off the ground. That’s because now, the most agile teams are hiring inexpensive, flexible, heavy-hitting experts that will work long-term, short-term, full-time, part-time, and everything in-between, in any role under the sun.
•Changing the game in real time. Today products evolve at the speed of the Internet, and software is a great example. Once upon a time you’d go to the store and buy a disk, you’d install it on your computer, and that was that. But now not only do you purchase software digitally, software updates are instant as well. This process allows companies to constantly iterate and iron out bugs, and it enables consumers to make updates in real time. People no longer expect perfection on the first go-round. We’ve become comfortable with beta cycles, with versioning, and we expect constant evolution. One thing business owners can be sure of is that mistakes will be made, customer sentiments will change over time, and if you’re married to a static business plan, you’re going to strike out.
•Moneyball funding. Gone are the days when you can waltz into a room and flaunt a perfect pedigree and a promising idea to snag a first round of funding. Investment opportunities that look good on paper have given way to analytics-based backing from data indicative of market and consumer demand that’s a more accurate assessment of future business success than a carefully designed business plan. Goodbye pedigree, hello proof. And if traditional VCs aren’t your speed, no problem. With crowdfunding campaigns and unprecedented access to long-tail investors through sites like Indiegogo, Kickstarter, and AngelList, armed with a compelling dream and the right data, funding is yours for the taking.
So if you’re still clinging to your printed and leather-bound business plan three years in the making, it might be time to kick it to the curb. And if you think you’ll need it eventually, check out the advice from LinkedIn: Even the most successful entrepreneurs-turned-VCs say that it’s more about the pitch than the business plan.
It might be time to come to terms with the fact that success is equal parts getting started, testing, data, and evolving as quickly as you can. And if you’re not willing to accept today’s business realities, I guarantee someone else will.
July 09, 2015 | Permalink
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Previously, I’ve written about what a Millennial entrepreneur can teach you about business. To better myself as a CEO, I continue to seek advice from other seasoned entrepreneurs. Experience matters and having mentors who can share their learning with you will help us, the Millennial entrepreneurs, save time to not make the same mistakes.
I had an opportunity to connect with Matt Hulett, the CEO of ClickBank. I asked for his advice on how to motivate a team, how to deal with hiring mistakes, where does he get advice from, and more. Below are Matt’s sage thoughts. I hope you learned as much as I did.
What do you think that more seasoned entrepreneurs can teach Millennial entrepreneurs?
Enjoy the journey. Too many millennial entrepreneurs feel success and happiness come from raising the next round of funding, reaching profitability, getting acquired, going public, etc. But happiness is in the journey and success should be measured through the many steps along the way instead of just the few big rocks.
Don’t be afraid to fail. Most entrepreneurs go through several failures before becoming successful; the key is to make sure you learn from each twist in the road.
Of course, the seasoned entrepreneurs have time and experience on their side and the ability to contextualize situations with past experiences. That said, be conscious of how you’re learning from your mistakes and don’t take mistakes personal. They are there to make you stronger, wiser and ultimately more successful.
In the end, each generation emanated from a social rebellion of sorts. Entrepreneurs that stemmed from the Baby Boomer generation were a departure from their parent’s conservative values; they wanted to build something new, carve out their own path. Millennial entrepreneurs were born in the Internet generation; they seek to understand how much they can impact the world. Millennials have a wonderful gift of living in the now, however, it’s key not to lose sight of the relationship building stage. Seek out your seasoned compatriots for lessons and advice along the way.
Again, check out the post.
I'll pile onto every popular post around, with the do's and don’ts on interviewing. Except, my list is extremely cathartic right now -- unemployment is on the rebound, and it’s getting harder and harder to get the talent you want. Really, it’s harder to find the talent that you need. Many candidates in the market are starting to get more self-assured, lazy, and cocky. While, many of us interviewers have long memories so don’t be too punitive on us in good times – you will need us in the hard times.
1) Research your interviewer(s) - you will most likely know who you are interviewing with. If not, then definitely ask the recruiter, HR, or the hiring manager. Once you have the list of who you’re interviewing with, do your research. In this day and age, information can be quickly accessible from anywhere at anytime. There is really no excuse to not do research. In particular, I always find it shocking that candidates don't spend 10 minutes looking up the interviewers on LinkedIn. LinkedIn is a great tool to use on getting to know your interviewer. Also, most users of LinkedIn check who is looking at their profile, too. So odds are that your interviewer will actually know that you were doing your research before your interview. You'll get to know a lot about them in terms of background, connections, etc. Heck, maybe you have similar connections, interests, work experience, etc. Finding a common ground is a sure fire way to get on the good side of your interviewer. Plus, you show the interviewer that you actually care about getting the job. Big interview points for you.
2) Research the Company and/or the Product - I am always interested in talking to people that are interested in my company and its product/service. If you don't care about what my company does then you should really look for another company to interview with. Most hiring managers feel the same way. A majority of the candidates that I interview don't do the very basic steps of engaging with my product or services. At the basic level of engagement that I ask a candidate is something like this…have you setup an account, downloaded the product, called into the customer service center, tried the service, etc., etc.? So many candidates either don’t do the most basic steps or they try to bullshit you. B.S. is very easy to detect so please don't lie. Interviewers know when you are lying.
3) Dress correctly - Wingtips or Flip-flops? You need to know how to dress for the interview. Ask the recruiter, hiring manager, or someone in HR how you should dress. They want to help you (because their jobs are stressful and they are trying to land good candidates) and will tell you. So, don't be a jackass and miss this. I have seen this mistake time-and-time again where you get a suit in a startup or the inverse. Interviewers are looking for many attributes and cultural fit is a huge competent. Example, if you are in gaming, you where a suit at Nintendo and jeans in a gaming startup. Duh.
4) Don’t be an a$$hole - hopefully you are not one, but I often find a$$holes are good at sucking up to interviewers but are not savvy liars to everyone else. I always check to see how the candidate behaved with a valued member of my team, whether it be the front desk receptionist, my admin, etc. I am always shocked to get reports where my employees received attitude and/or bad behavior. If you treat anyone on my team poorly, I will merely write you off as a fit. Now, I am not saying that I want a$$holes to hide their true nature because I wouldn't hire an a$$hole either way.
5) Putting the interview in buy mode - with some markets like tech running at historically low numbers, you get severe cases of arrogant behavior. Honestly, I have seen this before in the Web 1.0 (or Dotcom) bubble. You get some young punk riffing on how they are sought after from Google, Amazon, Facebook, or whatever. My attitude is that you should just work at those places and stop wasting my time. Furthermore, you should not be so disrespectful that you feel like you are asking more questions than you are answering. As a hiring manager, I am trying to assess intellectual capability, creativity, problem solving, leadership, and cultural fit. I know that most interview candidates are smart but I'll flush a candidate down the toilet if they feel like they are the new incarnation of whatever diva they wish to emulate. To be honest, most of us mortals that are not able to compete on salary or stock are looking for team members that line up around the company's vision. We want to hire people that believe in our vision and our cultural values. This is dating at its finest form. When a candidate spends the time to line up his/her belief system around what the interviewer (and management team) is marching towards, it really comes down the litmus test of the firm. Some companies value reasoning skills over emotional, IQ or GMAT scores over experience so on and so forth. To get in the door in most companies though, you should be prepared to sprint to the start line. My top 5 are 'table steaks' requirements.
You will most likely have to solve logical problems on a white board, write some code, etc. in addition to these tips. But, that's really about whether you have the aptitude around the job. Most of the interviewers that you’ll meet are ready to 'buy' you as a candidate if you do the most basic steps you should have a successful interview.
Many years ago, I was a founding executive at a company called AtomFilms. It was the brainchild of Mika Salmi and was sold to Viacom much later in its startup life. Atom was really before its time. The company was founded on the principles that entertainment was going to flourish from a new cadre of content creators across a wide variety of screens. Atom was transmedia (TV, PC, tablet, mobile, wearable) before anyone knew what the hell it meant. We were acquiring rights from live action films, to animated cartoons with the assumption that short format content was going to rule the day as screens become smaller and more Internet connected. This was the late ‘90s folks, and consumers were still accessing the Internet over 56K modems. There was no Wi-Fi.
We ended up discovering new forms of Web entertainment from now famous live action directors to animators. For example, JibJab was a great partner of ours that we helped grow from its early roots. A great post on that here. In fact, we basically invented viral videos and were sort of YouTube before YouTube.
I don't want to sound like the old man of the Internet (well, I am) but a lot of what is being discussed around the new networks sounds a lot like the vernacular and themes from old. It turns out that user- generated celebrity is bigger than mass media celebrities. In fact, an interesting survey reported by Variety shows that U.S. teenagers are more excited with YouTube stars than the biggest celebrities in film, TV, and music. I learned first hand from my 10-year old son that PewDiePie is way more interesting than anything else in traditional media.
It just goes to show that the Internet and its infinite amount of over-the-top, borderless signals are really changing the landscape of what we call celebrity. I hate to tell you that we told you so at AtomFilms (but, we really did tell you so). Now, as the rise of the self-generated star has clearly broken through the noise, so has a bevy of networks that have propped up to build scale around these homegrown celebrities. BusinessWeek does a good job of framing this story in their post here.
With the development of these new networks on the back of YouTube, I think the big question is how these multi-channel networks (MCNs) will take their scale and razor slim margins and turn it into real margins. Today, the revenue is split among YouTube, the MCN, and the talent. If history is a lesson in sponsorships, big media deals (MCN is the incubator for big screen talent), merchandise, and e-commerce will have to develop to make the big dollars. While the talent has become widely known to younger audiences, the dollars have not caught up to the MCN’s massive eyeball scale. For now, we shall wait and see.