Tom herman (it spring 2013)
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Tom Herman Entrepreneurship
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Entrepreneurship
Lessons Learned
Tom Herman
Partner, KITCapital
January 2012
Linkedin.com/in/TomHerman
Twitter: @tomherman
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Introduction
Tom Herman, Entrepreneur
Lessons drawn from experiences at: • govWorks Inc (portrayed in the movie Startup.com)
• KCP Capital (current employer)
• JumpTV (TSE:NLN)
• KIT Digital (NASDAQ: KITD)
• KPE Inc
• Guias Local Inc
• Dashbid llc
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Startup.com The Movie
Initially expected to be a b-school case study
Became a story about friendship in the crucible of business formation
Tells the story of the rise and fall of govWorks Inc
Ultimately has become a teaching tool
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What was govWorks?
govWorks collaborated with government agencies to enhance the way
government and constituents interact and offered the following products:
• govPay: Payments of taxes and tickets
• govPermits: Licenses and permits
• govJobs: Database of available government jobs
• govAuctions: Surplus equipment auctions
• govCRM: Constituent relationship management tools
• govStores: Ecommerce sale of docs, publications, memorabilia,
taxi medallions, etc
• govHotline: 24-hr answers/support for government related
questions
• govSurveys: Allowing constituents to voice opinions on pressing
issues
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govWorks Timeline & Employees
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июл.98 ноя.98 фев.99 май.99 авг.99 дек.99 мар.00 июн.00 окт.00 янв.01 апр.01
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Lessons Learned at govWorks
You may recognize some of the mistakes which were made in all areas of business:
• Strategic
• Human Resources
• Financial
• Marketing
• Operational
• Technical
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Strategic Lessons Learned
Focus attention and resources across fewer projects
Build learning culture to track and learn from successes & failures
Make time to communicate with employees
Listen to your advisors and let them know you have done so
Be Proactive, not Reactive; we followed ezGov, not our strategic plan
Don’t “Believe The Hype”
What we did right
Identified a ‘Mass Problem’ with a scalable solution (eGov Works!)
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Human Resources Lessons
Hire at a measured pace with a clear hiring plan
Define each job description before hiring to avoid the reactionary, “He/she’s good, let’s hire!”
Set aside adequate time to train for new hires, develop structured orientation program that runs for first 6 months of the hiring date
Develop and follow through on a documented employee review process early enough to allow for employee development and a pay/performance linkage
What we did right
Hired a superb team of committed professionals with ‘Can Do’ spirit
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Financial Lessons Learned
Ensure that budgeting is realistic to avoid requiring additional and unexpected fundraising in crisis situations
Fail fast and live to see another day
Link spending to specific revenue generation
Careful control of purse strings and resource allocation
Spend on what really matters, not what looks impressive
Scrupulously monitor cash flow situation
What we did right What we did right
Raised large amounts of capital quickly and cheaply
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Practical FAQs on raising capital
Raising capital is like selling your product and requires marketing, a well crafted pitch, and a personal connection with your investor
Valuations in early rounds often based on emotion
Capital is your lifeline, so be willing to give enough to succeed
Today, pre-revenue is extremely difficult
The team bios really matter
Be optimistic, but show defensible financial models
The need for working prototypes
Ideas are a dime a dozen, so widen the net
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Marketing Lessons Learned
Pay attention to market research
Focus on the right customer (constituents, governments, or Wall St?)
Spend marketing dollars to create revenue primarily and brand secondarily (this tests the product)
Shameless self promotion is more useful for raising capital than finding customers, but press can be a powerful tool
Before social media
What we did right
Created a powerful brand, “govWorks”
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Operational Lessons Learned
Add experienced team members (Gray Hair) early
Delegate responsibilities
Create sustainable organizational structures
Develop and document consistent procedures (back office)
Engender communication channels between groups and functional areas to avoid doubled efforts and conflicting goals
Create an operational plan that does not change frequently so the team can focus and finish one task before starting the next
What we did right What we did right
Navigated the challenging logistical transition from R&D organization to functioning operational organization supporting 24/7 customer support 24/7 customer support
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Board Board-Related Lessons
Build a board that brings experience, time to mentor on practical issues, and finances instead of a ‘name brand’ board
Listen to board members who make time to read board materials
Get information to the board regularly and in a digestible format
Balance between standing your ground and hubris
No surprises: Give bad news early enough that the board will be able to assist
Be sure to include key executives in all board discussions
What we did right What we did right
Created a high profile board improving our ability to attract quality employees, capital, and press coverage, as well as improving our ability to network and gain access to new clients
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Technical Lessons Learned
Call out problems with outsourcing firms (Sapient) and their employees early and insist they be fixed
Require product, marketing, and executive teams to adequately document product specifications and change requests early
Consider technical, HR, and market conditions around infrastructure decisions before making architectural decisions
Only bite off what you can chew, but plan for a wide open future
Develop with a componentized or SOA mindset
Beware Dangers of off-shore development
What we did right
Created in 12 months a highly functional web portal which supported complex, customized and robust financial processing
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On Working with friends
I support working with friends
Makes work fun
Known quantity
You already have experience working together
Find a friend whose skills complement yours
Requires open, honest communication
Downside of working with friends
Challenge of holding friends accountable
Difficulties at work jeopardize the friendship
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Working with American Clients
Over communicate
Under promise and over deliver
Be flexible
Understand the context, don’t just complete the task and check the box
Help your clients help you – If they can’t create the documentation you need, create the
first draft for them
Use spellcheck, get the grammar right, make it attractive
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Top lessons
Sign an employment contract
Be on the board
Document and sign a cofounder agreement with – Equity splits
– Responsibilities
– Weekly hours committed to project
Keep fellow co-founders honest and remove them and their equity quickly if they don’t deliver
Be generous with equity, if necessary, to raise capital
Keep the books or get an accountant
Write a business plan even if you’re not raising capital
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Some quotes to end
Luck is the intersection of opportunity and preparation (Ed Shepherd)
Entrepreneurship requires balancing unbridled optimism with delusional foolishness. Most entrepreneurs are mocked and misunderstood until they are wildly successful, at which point the chorus changes from “good luck with that ‘business’, pal” to “I always believed in ya, buddy!” (Ashkan Karbasfrooshan)
No conflict, no interest. (John Doerr)
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Wrap Up and Q & A
Let the journey be
the reward
Tom Herman
Twitter.com/TomHerman
http://www.linkedin.com/in/TomHerman