A place to put random occurrences in my life...

Wednesday, September 14, 2016

'Tis the K1 Season

Over the past 5 years or so, as an "angel" investor, I've had the opportunity to put my money to work in early stage tech companies, venture and real estate funds, restaurants and other businesses.  As such, I have the pleasure of harassing people for their K1s.  And, since most of these investments were through an LLC that I control, I'm also on the hook for generating my own K1.

For the most part, tech companies tend to be formalized corporations, commonly Delaware C Corps.  Some earlier stage tech companies start out as LLC - often partnerships - and convert to C corps once a more significant investor is brought in at the seed stage.  Venture funds and restaurants are almost always structured as partnership LLCs.  Any LLC filing as a partnership must generate a schedule K1 listing the share of income for each of the partners.  People and businesses on the receiving end of the K1 must then use the information provided in the K1 to file their own taxes.

The IRS allows for a 5 month extension in filing taxes, which many LLCs take advantage of.  The final date to file without penalty is September 15th.  At this point, I have ~10 investments that issue K1s and take advantage of the extended filing timeline.  For the most part, I have all of my K1s by July, but invariably there are always 2-3 that drag the process into August.  This year, I have one entity which still has not provided a K1 to me - as of September 14th - the day before the filing deadline!

In a review of the received K1s, two of them had erroneous information, each crediting me with larger distributions than what I had I actually received.  My hope is that early stage businesses are generally better at running their business than keeping up with their tax teams and ensuring accurate paperwork.

My accountant's review of the K1s was late as he had been waiting for all of the K1s before actively digging in.  Now it's a scramble to work with the tax teams for the companies that issues erroneous K1s - and of course I'm still waiting for that last K1 to come through.

Although I only have two partners in my LLC, I still have to generate the K1s and of course file my LLC taxes.  And such is the fun and joy of K1 season.

Monday, June 6, 2016

Hiring Your First Salesperson

Bringing on the first sales hire has recently become a popular topic amongst several of our portfolio company CEOs.  For SaaS companies, the discussion generally centers around 3 key questions:

  1. Has the company achieved product/market fit?
  2. Has the CEO and/or company leadership demonstrated a repeatable process for converting prospects into customers?
  3. Are there enough leads to necessitate a new sales hire?

Product/Market Fit
It's easy to know when you've hit your stride and achieved product/market fit.  Customers will begin to churn less frequently and more of them will get beyond the first 3 months of usage.  You'll see more engagement within the product and you'll hear more frequent anecdotes from your customers about how you're solving their problems and providing real value.  You'll start seeing more of your leads coming in through word of mouth and you'll quickly realize that the grass roots marketing efforts and your dedication to customer on-boarding and success are paying off.

Don't hire a salesperson until you're confident about product/market fit.

Repeatable Sales Process
Establishing a repeatable sales process can be trickier for new CEOs, especially if they lack go to market experience. It can be tempting to bring in a hired gun to build the process and effectively outsource the responsibility.  Don't do that!

Sales leadership is ultimately the CEO’s responsibility.   As a result, the CEO must intimately understand what it takes to lead a prospect through the buying journey and turn them into a customer.

Some questions to consider when establishing the sales process:

  • Is the demo built out and effective?
  • Will multiple salespeople be able to use it and/or create their own demos?
  • Does the deck or one-pager communicate the product vision and value, and bring the prospect further along on their journey?
  • What should the discounting matrix look like?  
  • If you're selling to Enterprise customers, do you have enough of the security items figured out (process, documentation, training, external audits, etc)?  
  • Do you have a contract that will be a reasonable starting point for larger customers (as opposed to your online EULA which would typically work as a clickthrough for smaller customers)?

The CEO should establish the sales process, understand the journey from prospect to paying customer, and optimize their conversion rates.  This will become the starting point for your sales compensation structure as well as a barometer to gauge their success.

When it comes to leads, it’s important to balance quality with quantity.  I'm in favor of having a smaller quantity of leads that are of a higher quality - assuming there are enough leads to get your first salesperson started.  You don't want so many leads coming that your team is unable to handle each of them and they are ultimately dropped.  And you want the leads to be of the highest quality to give your first salesperson the best possible opportunity.  It’s likely that an attempt to drive significantly more leads in the short term will ultimately result in a lower level of quality.

There's a natural tension between sourcing enough quality leads for your salespeople vs. having them drive some of their own.  As you scale your sales team, your marketers will have to catch up and re-calibrate, giving your new salespeople the opportunity to ramp and your existing salespeople will have to prospect on their own.

Another aspect  that new CEOs struggle with is in defining the  role that they want their first sales hire to fill.  Does the company need:

  1. A process VP who can scale the sales organization?
  2. A rolodex-carrying executive with industry contacts?
  3. An SDR (sales development representative) who can do a first screening with leads and only pass on true prospects?
  4. Or a traditional inside sales AE (account executive)?

If you hire the "VP", you should make sure they understand that the primary expectation for them is to sell, sell, sell and to carry their own weight.  They are the only salesperson so establishing a formal process, crafting compensation plan, and any non-selling activities can wait - while the actual selling can not wait.  Unfortunately, it's difficult for most people to be both great at selling and to be great at managing the sales process simultaneously.

A rolodex-carrying heavy hitter is really only an appropriate choice if you’re elephant hunting right from the start.  As it takes time for the product team to build necessary functionality, scale and security needed by Enterprise customers, there are few companies that should opt to sell to the biggest and most complex organizations first.  The rolodex guy can be critical for the growth of an Enterprise software company, but this person is usually a poor choice as a first sales hire.

If you’re considering the  SDR hire, I would argue you're not actually hiring your first salesperson. A salesperson is someone who will  close the majority of your deals on their own, while an SDR could be extremely valuable  for  effectively managing your time with real prospects further down the funnel.

A SaaS company’s first sales hire should be an account executive.  A quota-carrying salesperson who is driven to hit their targets and achieve their desired compensation levels. Ideally, this AE would have experience meeting and exceeding quota, as well as a hunger and enthusiasm for selling your product..  Empower a socially competitive sales environment by hiring two AEs at roughly the same time.  Beyond increasing sales, hiring two AEs can help you define and evaluate performance while driving healthy competition and helping to build a culture of high performance sales.  

More to come on thinking through comp plans for your first hires...

Tuesday, January 12, 2016

My Home Screen

Inspired by M.G. Siegler's home screen post, I took a look at my iPhone home screen.  And the disappointment of clear and apparent disorganization immediately set in.  For a time I was a bit OCD in maintaining a clean layout.  Then as time wore on and my collection of apps continued to grow, I became obsessed with putting like apps into their respective folders.  I still had about four pages of icons to go through, not including the folders and so I ultimately resolved to search whenever I wanted to open any application.  Once search became my prevalent mechanism for finding content, my iPhone organization went out the window and I was left with this:

You can see the folder addiction I had, but actually opening anything quickly by clicking through is extremely unlikely; it was all about search for me.  The picture is a bit dated as well, from December 2014.  

I decided to start fresh and cleared out all the apps, moving them to secondary screens.  And then I started adding things back in that I actually seem to be using.  It's been a week or so, and I like where this is headed.  Search is awesome for finding apps that I use once a week or once a month, but it's so much easier to just click from the homescreen to the apps I use on a daily basis.  Here's the new look, along with a new picture of the family (also changed this week), from November 2015:

Starting from the top, the first two apps help me in the morning.  Although I don't come close to day trading, I still have an urge to check the markets at least a couple of times throughout the day.  StockTwits is my default watch list, partially in deference to my partner Howard, and in part because they actually do a great job of surfacing commentary and sentiment around the stocks I'm following, which is just as important as the news around them.  Interestingly, StockTwits just released a cool integration with Slack that enables real time quotes inside of Slack.  The second app is just the weather.  Living in San Francisco means that weather changes are expected when you cross the street, but I still like to get a general sense of what I should expect when I wake up.

The next two apps are the camera and Google Photos.  As a parent of two young kids, fast access to the camera is essential.  And I have a preference for Google Photos over the standard Photos app for numerous reasons including the ability to sync across devices - including deletions.

In the second row, I have Google for all things search (my 6 year old is always asking me things that I have to look up!), FB and Twitter for social (I know, I'm old school for not having SnapChat, WeChat - even FB Messenger!) and Yelp which is still incredibly helpful, at least in San Francisco.

In the third row I have my fitness apps coupled with music.  Spotify and Nike Running definitely go together nicely.  It might be a bit said for me to have Fitbit there, but now that I've committed to at least 70k weekly steps and a minimum of 8k daily steps, I need to check my progress from time to time!

The fourth row is mostly around transportation.  I usually walk from meeting to meeting, but as I find myself in new areas of the city often enough, a quick review of where I'm heading on Google Maps is helpful.  And Uber is there to help when a walk just isn't the thing to do.  Although I have Safari on this row as well, it's actually the one app I haven't opened directly.

The bottom row is for my business communications.  Email has been my default ahead of phone for many years and Google's Inbox is now my favorite interface (on the web and on mobile alike).  Phone and SMS are standard and my current calendaring app is Sunrise, which I've been very happy with for the past few months.  

I still have two more rows to fill up, but I'm now much more selective with the apps that get to live on the home screen.  It will be interesting for me to see how my layout changes over time.

Saturday, January 2, 2016

It's that time of year..

For most of my adult life, I've played the game of making New Years resolutions - mostly around eating less and exercising more.  And for most of that time, just as easily as I made the resolutions, my resolve seemed to fade into the ether.  That's probably the reason I skipped resolutions this past year - why even bother?

But something is different this year.  I'm sharing my resolutions publicly.  I'm hoping that my friends reading this will shame me into keeping the resolve if they see me straying.

On to the list, which of course has the requisite eating and exercising items on it:

  • Drinking - It's a very common thing for me to meet "for drinks".  So common, that I probably do it on average of 3-4 days a week, and some days have more than one such meeting.  In addition, it's pretty rare for me to have dinner and skip a glass - or two - of red wine.  I'm not planning on completely cutting out alcohol, but I am planning on a significant reduction.  With that, I resolve not to drink alcohol more than 2 nights in any week.
  • Eating - I go through spurts of healthy eating but somehow manage to sabotage myself with bad decisions on weeklong vacations, indulging at sporting events, or coming up with other excuses.  At some point in the last year, I tried to go "mostly" Paleo, and think I felt great during that stretch.  I'm going to need my wife's help on this one, but I resolve go all in on Paleo.  I'm looking forward to placing my first MealMade order on Monday. Caveat: by all in, I plan on sticking to the spirit of the plan rather than being absolute - I'm sure I'll still have salad dressing, ketchup and other condiments that don't conform.
  • Walking - I make it a point to walk to my meetings as often as possible.  Once or twice a week, I'll even walk the 3 miles from my house to SoMa - I often spend the time on phone calls so it's quite productive.  I average just over 10k daily steps on a weekly basis (9.5k for the past year as shown in the pic), but the daily totals range from just under 4k steps to over 15k steps.  I want to be more consistent and so I resolve to walk at least 8k steps 6 days per week.  I'm hopeful this will act as a gateway for making healthy choices.

  • Television - I have a habit of turning on the television once the kids go to bed and once on, the tv doesn't turn off until I go to sleep - often 3 or 4 hours later.  Although I tell myself that I'm using the tv as background noise while I work on my laptop, the truth is that whatever I'm working on gets less focus and it takes me longer to complete, and all the while, some useless junk is permeating my brain.  I'm not quite ready to go cold turkey, but I resolve to not watch more than one hour of tv per night.  Caveat: watching football all day does not count as watching tv!
  • Blogging - I keep threatening to write more, but haven't been able to make this a consistent practice.  I'm willing to bet I should be able to manufacture 50 things to write about over the course of this year (first one will be done as soon as I publish this post!), so I resolve to blog at least once per week.
  • Reading - As a kid, I was a very avid reader.  While my parents had visions of me reading the Encyclopedia Brittanica they had purchased for me (it's still in my bookcase at my parents' house), the truth is I was more interested in fiction.  Regardless of the topic, I want to get back to reading something other than the content clicked through various URLs and instead get back to books.  I resolve to read at least one book every month.
These resolutions are invariably linked together and I'm hopeful that doing well with one of them will help me do better with the rest.  Less tv and alcohol will certainly give me more time to read, write and even sleep better (not one of my resolutions, but would be a great side effect of the others).  Let's see what happens!