Tag Archive for 'CEO'

The important business skill in life

I believe there is one true lesson that matters for anyone running a business in whatever space you find yourself in. A skill that if you learn the manage techniques in executing them, are transferrable to any business. Thee core concept is called “working capital”, and although they teach this as a basic accounting concept — the meaning of it is not something you can learn, but simply feel have to feel as a CEO founder.

Have you ever had to worry about not being able to pay payroll next month? Have you ever had to raise financing to *continue* (not start) the operations of your business? That’s what I call the working capital burn. And while the tech press is littered with “acquisitions”, the truth of the matter is that the majority of businesses that get acquired knew their future was limited and/or their working capital was running out. An acquisition is a failure in the ability (which may also mean fatigue, not just lack of skill) for an entrepreneur to expand their working capital.

Working capital is a deep concept that incorporates a lot of skills in order for it to successful function. It means fundraising and revenue; it means cost control and hiring. Working capital management is one of the three core functions any CEO — big or small business — that s/he needs to be responsible for outside of setting the strategy and building the team. But the truth is, it’s something everyone in the businesses needs to be responsible for — it’s just the CEO is the only person who has a true picture of the operations.

One of the sad things about the recent financial crisis that has had many economies go into deep recession, is that thousands of businesses went bankrupt despite existing for many decades in some cases. And the reason, was because the banks stopped lending when even $20k may have been enough to boost the working capital of an existing business to continue its operations. Because you see, working capital is not something you solve once you graduate from being a startup — it’s the thing you need to think about from the first day of starting the business and the last day of ending the business.

When I hear of a CEO who is hiring staff faster than the revenue growth of the business, I shake my head. When I hear of a person giving me advice on how to run my business about investing the businesses’s cash in a certain direction despite more short-term challenges being apparent — I dismiss them because they clearly have never had to *feel* the stress of the working capital burn. When I have people claim “profit” is bad even in non-profit organisations, I can only put my hands up in despair because they don’t understand that business has costs — many of them indirect — which you need to always be thinking about and building up the cash reserves on seemingly unrelated activities.

The working capital burn is a thing that all entrepreneurs that have experienced can relate to, and why they can connect despite decades between them in age and a world of difference in terms of what business they work on. And I have to admit, despite my six years of tertiary education and three years work experience to become a chartered accountant where working capital was just one of many accounting concepts I had to learn; it wasn’t until I started my own business that I *felt* the working capital burn and really understood it. Which is why before I can trust anyone in a position of authority for a business I run or a business I invest in, I look to see if they not only get working capital, but if they’ve felt the working capital burn before.

The long term emotional mind

Last night I was at a dinner on a long table of accomplished entrepreneurs and some investors, having an open discussion about entrepreneurship with the guest of honour Kevin Rose. Among many discussion points, the question was asked to the table: what traits do you look for in a founder?

Before we get to that, let’s start with what does it actually mean to be an entrepreneur? Well, quite simply someone who organises resources to create a product that customers pay for. A lot of people have enterprising personalities and so could fall under this definition, but a successful entrepreneur in my eyes is someone who is able to make an income from a product they created (whether from cash flow or from investment). How much income, well that’s a personal question but the point is you’re making money because of you.

But what is it, from a DNA point of view, that makes someone a successful entrepreneur? Someone who takes on “risk”? Someone who is a generalist in their skills? Good at delegation? Yes and no: these are descriptive traits that don’t define the entrepreneur. I think there are actually two things that makes someone a successful entrepreneur, and both these points I learned by one of the most successful entrepreneur’s I know, Steve Outrim.

The first is thinking long term. At a table with people like Gower Smith, Sam Morgan, and several other accomplished people I’ve come to respect — Outrim asked the question on what was the single most important trait in success and he identified the ability to think long term as the key to his success, which everyone nodded in agreement.

The second nugget of wisdom, was shared earlier this year by Outrim at a house warming party to a few of us and he was insistent that was understood him. He pointed to his head: it’s the ability to not let anything affect you mentally. It was a point that took me some reflection to truly appreciate the implications of what he meant.

Think about that. Even if you don’t have your own business, let me help you relate.

On thinking long term, what do you plan to do with your life? For some of us, that freaks us out and for others we have a meticulous plan on what. Entrepreneurs think about their company and 10 years from now. A long term vision, with assumptions that need to get validated, which translate into activities today to enable those assumptions.

The emotional mind, is a tougher one to explain but something all true entrepreneurs will relate to more. As a point of comparison, imagine you are in a relationship and you have your heart broken: most of us have experienced that at some stage in our life. It’s horrible and like a gas that infects your thoughts that you can’t control. Likewise, the feeling of being in love (if you’ve truly experienced it) can uplift you in ways that words cannot explain. Both those highs and lows reflect your emotional self, what all normal human beings experience. Let’s call them “intense” thoughts.

For the entreprener, that experience happens on a daily basis: you start the day with your heart broken and you end the day on a high. Imagine going through intense thoughts every day for years at a time? Can you imagine what impact that has on a person?

Bravery, commitment, and intelligence (specifically, the ability to learn quickly) are three other traits that I think define a sucessful entrepreneur. But its the ability to think long term and deal with the demons in your head that I think separates the boys from the men.

Indeed, I believe the role of a CEO is very similar: my experience is that the best CEO’s think strategically into the long term, but also, have a strong emotional control of their mind. But a CEO is also a job.

Think about it as an employee, where you worry about your bonus or getting promoted. That anxiety is what entrepreneurs face, but from the other perspective: making sure there is enough cash in the bank to pay their staff bonuses and have them rewarded so they can keep them on deck. As an employee, you can face resentment if your expectations are not met; as a CEO founder, you could face jail time if you don’t manage expectations.

I will leave you with this one thought, which is how do you develop these two essential traits which are more than just skills but a state of mind. As Confusion says:

By three methods we may learn wisdom: first, by reflection, which is noblest; second, by imitation, which is easiest; and third, by experience, which is the most bitter.

How to become a “full time” foreign entrepreneur in the US

Today I hit my third anniversary in the United States. I moved over here for a startup and learnt a valuable amount of things in my two years there (which was always intended as a job to bring me to America and give me a start); and this last year I’ve had the privilege to be mentored by one of the most successful venture capitalists in the world (George Zachary) has invested $150m over 17 years and returned $1b, mostly recently Yammer selling to Microsoft and Millennial Media listing publicly) working for one of the oldest venture firms in America (CRV or Charles River Ventures).

This month however marks a new beginning: I’m now a full time entrepreneur in the US. And I take great pride in that, because I’ve spent many countless months — years even — trying to work out how to play by the immigration system to enable that.  I’ve worked with lawyers, Googled the hell out of the Internet, and collected dozens of anecdotes from other entrepreneurs who have all experienced the same misery that only another expat can appreciate.

Visa’s generally favour a limited supply of talent that tends to bias the multinational company. There is no such thing as an ‘entrepreneur visa’. Silicon Valley screams out about the need of a “startup visa“, which to be honest, I have serious reservations about as it limits the potential of an entrepreneur (ie, you are required to raise funding from a major investor like a VC firm — that’s like saying you are required to get a bank loan to be able to start your business).

But after spending years pulling out my hair out trying to work out how to get around the rules legally, I’ve developed the following solution with my intent in sharing it so as to prevent the wasted opportunity that entrepreneurs after me may experience. Even some small sentences in this post I’ve spent many hours trying to validate. I hope you waste that time on marketing for your product or enjoying life, as time wasted on visas for entrepreneurs is the least productive thing society has ever invented.

As a disclaimer, I am not a lawyer. I’ve just leveraged my background in the English language to understand the rules myself, which has successfully resulted in three separate visa’s for myself and 1.75 for employees of mine.

Step one: read Geoff’s post

My friend Geoff wrote in detail the process from his own experience. This is the best summary I’ve seen to date and highly recommend you read it. My advice below is a bit bigger picture (as opposed to procedural) and tackles some of the conceptual issues (and ones that I actually disagree with Geoff on).

Step two: Get to the US.

It’s simple, but the more time you spend in the US, the easier it becomes — even if it’s for three months at a time on a visa waiver as a “visitor”. For example, you build a network of people who can support and advise you; you can build up your credit history which takes on year minimum (tip: get a secured credit card); you can setup a bank account which is near impossible to do remotely. If you move over with a job, you get a social security number issued immediately (well, that’s a separate story — it takes over a month on arrival and your life is on hold until you get one), a huge benefit given how key it is to all things regarding your identity. Ultimately, you learn how things work.

Step three: Setup a company

The US operates in a very decentralised manner, as seen by how its company law operates. As a consequence you get a lot of  innovative forms of entities being invented by states like “B Corps” and “L3C’s”. Ignore them — most companies are either C-corps or LLC’s.

An LLC will do, as it’s the lightest-weight incorporation you can get, and in some cases, might be the only option. (Certain corporations like S-Corps require you to be a tax resident of the United States…something hard to do if you’re not present in the country for less than 183 days).  It doesn’t matter where you register it: “Deleware” simply markets the brand of their state, due to the legal system having experience and other factors. Truth be told, a company is a company. Have some fun and register your company in Nevada so you can do your annual shareholder meetings in Vegas — heck it’s not a crazy idea as Nevada not only has zero income tax (a thing levied by some states and the Federal government) but it also is one of the most difficult states in which to “pierce the corporate veil.”

Step four: elect a board

Don’t forget, that your E3 or H1B visa is an employee visa — so you need to make sure you an employee. Advice I heard from the top tier lawyers suggested you needed at least three board members (assuming you are one of them), so that you could be “over-ruled” and theoretically fired by a majority vote of the other board members. This was recently clarified by the US government:

USCIS indicates that while a corporation may be a separate legal entity from its stockholders or sole owner, it may be difficult for that corporation to establish the requisite employer-employee relationship for purposes of an H-1B petition. However, if the facts show that the petitioner has the right to control the beneficiary’s employment, then a valid employer-employee relationship may be established. For example, if the petitioner provides evidence that there is a separate Board of Directors which has the ability to hire, fire, pay, supervise or otherwise control the beneficiary’s employment, the petitioner may be able to establish an employer-employee relationship with the beneficiary.

Step five: In your job offer to yourself, pay yourself above the prevailing wage. For real.

US Immigration is partly designed so that American’s are protected from foreigners stealing their job. Hence the need to satisfy the ‘prevailing wage’ case which requires you be paid above average from what an American would be paid, as defined by official statistics done by occupation and region. You can use this online tool to determine which job you need to match yourself to: http://www.flcdatacenter.com/

You can be creative here, but don’t be too creative: hiring yourself as a “secretary” at $29k a year (2012-2013 period) when you are clearly the CEO is not something I’d risk. A General Manager though is much more like a founder CEO, which is $73k —  much better than the CEO pay rate of $212k.

But just because you get your visa application approved and a visa, doesn’t mean you can fake this rule. I know of an entrepreneur that “deferred” payment of his salary — which is completely legal but were he to apply for his next visa (or reenter to the US) and have no evidence of pay checks, there would be  complication. (Athough if it took you more than two years to raise funding — the length of the visa — maybe you have bigger problems.)

I’ve actually been asked at US borders to show proof that I have been paid a wage in past — as in, actual pay stubs or bank statements. Eventually, you are going to need to prove you were paid not just above the prevailing wage…but actually paid.

Other comments

  • You should appreciate how the visa system works: the visa itself is simply a travel document; whenever you re-enter the United States, you are reissued form I-94 which is the actual work permit. Technically, you could enter the US a month before your visa expires and the I-94 that you are issued allows you to legally work in the US for a full two years (only one nerdy customs official ever did this to me, most border officials don’t even realise this rule themselves). The only catch with this of course, is that it’s a one way ticket when leaving the US and you don’t have a valid visa for re-entry: out of practicality, labour movements at check points are how governments seem to be able to enforce their immigration policies.
  • Australian’s have a God-send in the form of the E3 visa which is plentiful in allocation, has less hoops to jump through, and even allows a spouse to get a visa as well. The default option for all other foreigns in the H1B which has its own complications. Other options include the B visa (business travel) but that’s a temporary solution — the O visa (for extraordinary achievers) is an option for people who have a public profile, but expect to spend a lot of time with the lawyers preparing this submission.
  • If you don’t have a degree, things are a lot harder for you. Your only option would be the O Visa (which means you need a lot of press) or the ability to prove you have ‘equivalency’ in work experience. One university year of study is equivalent to three years work experience ie, you need 12 years based on a four year standard US degree).
  • At least for the E3 visa, the first time you ever apply for it you need to do it from your home country. Subsequent visas you can do it in other jurisdictions.
  • ADDED April 11 2014: Something I forgot to mention here is the L1 visa which not only is a great visa but the best solution if you don’t have a degree and if you want ‘dual intent’ which means you want to eventually apply for a greencard. The only catch with the L1: you need to have been ’employed’ by the company for one year before initiating the ‘transfer’

All in all, all expats in the US have war stories to share about how they managed to secure their living in the country. The above solution, as simple as it sounds, is also not that simple as it requires real capital or revenues to be able to pay yourself — but with that said knowing three years later this is a legitimate solution is something I would have paid good money for. It’s still not easy, but then again maybe it shouldn’t: little did I appreciate, getting to this point has me now appreciate what a true entrepreneur is. Seeing this as an obstacle that can be overcome will be what Phil Libin, the CEO of Evernote, is looking to hear from real entrepreneurs.

Good luck. Now, you can focus on what really matters: finding your market.

The founder mythology’s impact on the talent crunch

In the last month since running StartupBus and reflecting on the boom in seed funding for startups and the talent crunch of engineers in the San Francisco Bay Area,  if it’s one thing I’m seeing a lot more of, it’s the fact that more ‘entrepreneurs’ exist. I’ve been asking myself then, what exactly is a founder?

So it’s good timing to see Chris Dixon to write about the very topic where he defines a true founder from the fake one. But for me, it isn’t so much about glorifying the ‘founder’ as some hero and everyone else ‘not good enough as me’ as Dixon alludes to. Rather, I’m curious: what is it that makes someone a good founder?

When I asked my friend Alisdair Faulkner a few weeks ago on this very topic, he said  that a founder is by the simple fact they are. Meaning, instead of talking — they actually are doing something, which goes to Dixon’s point. I’d argue that’s the fundamental trait of being an entrepreneur, which is the bias to action. But is being a do-er a good founder?

One prominent venture capitalist I spoke to recently remarked that a lot of the startups these days are smart engineers dropping out of Google, thinking they are founders and getting funded because they can. But the truth is, they aren’t good founders and it’s likely they will fail.  The danger of this point, is that we won’t know this, as the increasing trend for companies is to acquire startups for the talent (over the product or profits) which means these failures in capable founders are masked as successes and who in turn will influence the perception of success.

That’s a bad thing and let me explain why. To give you an example in a different context of why this matters, a basic competency for management is the ability to motivate your staff. If you can’t do that, you will create a significant cost to the businesses but which goes unnoticed and impacts the organisation — like a slow growing cancer due to reduced morale. Why is this a problem? Because an incompetent manager will get promoted through their career, continuing on their path of destruction. Problems they caused get masked as other issues, and so incompetency doesn’t get rained in on.

…so let’s step back here. Why does it matter? Because just like the mythology of the CEO, I think we need to clearly set the expectations in the industry that behind all the status, you should be true to yourself.

Let’s look at this from another angle. A good founder is usually a superstar…but  makes a terrible CEO as CEO’s need to be good at delegating rather than doing it all themselves. This weakness is hidden in small environments but becomes apparent when the business needs to scale.

Fred Wilson recounts a story of what a (good) CEO should do. He claims:

Sets the overall vision and strategy of the company and communicates it to all stakeholders. Recruits, hires, and retains the very best talent for the company. Makes sure there is always enough cash in the bank.

And that’s it. Notice no word is mentioned about being a good worker. Good CEO’s make terrible workers (in the sense of building the product, doing admin, etc), in the same way good founders make terrible CEO’s (as they want to work on the product and neglect the management side of being a CEO). And likewise, a terrible CEO is a founder who does what founders do which is experiment when instead they should be focussed on execution and not distracting the business. This is why a startup CEO is a very different animal from a growth-stage CEO — and once again, very different to a mature company CEO. Which is why I have a lot of respect for people who are founders and are willing to hand over the CEO role to another person, as they are making a mature decision that benefits the business, not their ego.

Anyone can be a founder, like how anyone can be a CEO — or an employee — but that doesn’t mean they are good ones. So if starting is what defines a founder, then anyone is a founder — but what makes a good founder is one who starts and is able to finish.  Think you’re a founder or a good CEO? Maybe you are, but the good ones don’t hide behind titles. Feel free to call yourself one, but at least be honest and recognise you can’t be good at everything.

And who knows, maybe this talent crunch might ease up  a bit when smart engineers realise they are…smart engineers and that’s it.

The secret to effective people management

I’ve been doing a lot of thinking, talking and reflecting these last few months on a broad cross section of things. One of them is people management, which actually has been a competency I’ve spent years trying to understand: whether it was managing volunteers at non-profits, coaching junior staff in a work environment, or observing how other people interact with others and the impact it had. Today I came across something on Quora that Ben Pieratt wrote and which I think is very wise. He reflects on the work ethic:

I think it comes down to the fact that, for some people, work is personal. Personal in the same way that singing or playing the piano or painting is personal.

As a creative person, you’ve been given the ability to build things from nothing by way of hard work over long periods of time. Creation is a deeply personal and rewarding activity, which means that your Work should also be deeply personal and rewarding. If it’s not, then something is amiss.

Creation is entirely dependent on ownership.

Ownership not as a percentage of equity, but as a measure of your ability to change things for the better. To build and grow and fail and learn. This is no small thing. Creativity is the manifestation of lateral thinking, and without tangible results, it becomes stunted. We have to see the fruits of our labors, good or bad, or there’s no motivation to proceed, nothing to learn from to inform the next decision. States of approval and decisions-by-committee and constant compromises are third-party interruptions of an internal dialog that needs to come to its own conclusions.

Worth reading is also this interview with the CEO of Zynga (one of the fastest growing companies in Silicon Valley). He says what he does to motivate staff, which put words to what I’ve seen in my own observations of effective (and ineffective management).

You can manage 50 people through the strength of your personality and lack of sleep. You can touch them all in a week and make sure they’re all pointed in the right direction. By 150, it’s clear that that’s not going to scale, and you’ve got to find some way to keep everybody going in productive directions when you’re not in the room…

…I’d turn people into C.E.O.’s. One thing I did at my second company was to put white sticky sheets on the wall, and I put everyone’s name on one of the sheets, and I said, “By the end of the week, everybody needs to write what you’re C.E.O. of, and it needs to be something really meaningful.” And that way, everyone knows who’s C.E.O. of what and they know whom to ask instead of me. And it was really effective. People liked it. And there was nowhere to hide.

In case you miss the point, this is it: giving ownership is a powerful emotional state that can literally transform the perception someone has of their work.

Update 11 October 2010: My good friend Alisdair Faulkner — an experienced technology entrepreneur and executive — explains the spirit of the term “ownership” better with a clarification. Alisdair says it’s less so about  ‘ownership’ than it is ‘creative control’, which he says means “Authority and Accountability vested in the same individual”.

Silicon Beach Australia podcast #1

Looks like I am now venturing into the world of podcasting!

Its been a great learning experience in creating this form of media, and I look forward to doing more. In this first episode, my co-host Bronwen Clune and yours truly interview CEO of Atlassian Mike Cannon-Brookes .

We are doing it with Australian start-up The Podcast Network . Why? Because the first rule Bronwen and I agreed on, was that if we are going to be promoting Aussie innovation, we might as well eat our own dog food do it whilst using Aussie innovation where possible. Certainly, the experience has given me a great insight into the value of such a service, which I am sure I will write about in future. Its been excellent working with Cam and team at TPN.

For now, here is the link – I hope you enjoy it! Silicon Beach Australia podcast – Episode one

Link to the podcast blog: http://siliconbeachpodcast.com

The Wizards of Oz

The Internet has enabled a new world-order, causing people from the CEO down in almost every industry, an amazing amount of grief. The music industry, the newspaper industry, the telecommunications industry – heck, even tangible non-digital products like books – have been challenged at the core. However what these CEO’s have begun to realise, is that the Digital Age is no longer a threat, but a vehicle for growth.

Innovation is a key source of competitive advantage. And if you are an established company, innovation is hard. What takes six months of trying to convince the right people, jumping through hoops to keep internal stakeholders happy, and then finally releasing a half-baked product that is dramatically cut down from your vision – could be done by a bunch of college students in a garage over a weekend. Economies of scale is no longer an advantage in the Information Age – small, agile teams are.

In America – Google, Yahoo, Microsoft, News Corp, IAC and the rest – rely on acquisitions to fuel their innovation. An amazing amount of innovation is occurring on the web at the moment – not just new products but new business models. And the above mentioned companies have realised that acquiring a start-up early on, is a cheap way to innovate – as well as a great way to recruit.
But what about Australia?

Like America, we have a strong Internet industry with some clever entrepreneurs. But unlike America – no one is acquiring them. Could it be executives of this country’s leading companies just don’t know how much talent is available onshore? Well working in a professional services company that advises these companies, I am sure of it. Even a tech-savvy person like me is still discovering the amazing amount of talent and potential in my city, let alone country.

So here is to educating – both you and me – as I begin to start profiling innovation in Australia To make a suggestion for me to review on my blog, post it here

Too many chiefs, not enough Indians

Nik, the CEO of Omnidrive, says something that been on my mind as well – everyone saying they “support” OpenID but they only want to be providors, not consumers. I think he makes a fair call saying that if you are going to brand yourself with OpenID, that you meet his five requirements. They are a little too idealistic, but I certainly agree that your application becomes a full consumer of OpenID is a bare minimum.