I feel like I'm in that scene from The Jerk where Steve Martin sees his name in the phone book and exclaims, "I'm somebody!"
I'm published (sorta)!
A couple of years ago I wrote this post on the science and art of negotiating a term sheet, which turned out to be a fairly popular post. It also caught the eye of Professor Noam Wasserman, who teaches entrepreneurship at Harvard Business School (and who created the "Rich-vs-King" framework). We decided that we would turn the idea from the blog post into an "industry and background note" which was finally published online here.
The 20-odd page case note takes the core idea from the blog post and extends it by including a lot more explanations of the terms as well as some real world examples and a template for scoring a term sheet.
The note is behind a pay wall, but if you're raising money for the first time, it's probably worth the $6.95 (none of which is seen by yours truly).
They teach everything else. Why, in business alone, you can get a masters or PhD in marketing (sales' evil cousin), finance, human resources and entrepreneurship (which isn't even a business function, but rather a business practice). In fact, for every head of a business function in a company (VP of whatever), there is a graduate degree that person can get specific to their function...except sales.
Not having formal academic training in sales opens up so many problems and inefficiencies. For example, in hiring an young employee you have no trusted third party indicators of capability...I can say with reasonable confidence that a young computer science graduate from MIT could be a talented programmer but how to assess the skills of a young candidate for a sales position? But more importantly, sales has become a discipline that is a compendium of anecdotes and wive's tales. Go look at the "sales" shelves in a book store to see the latest batch of snake oil. My favorite, is when a sales candidate talks about her "Rolodex" as a reason to be hired (imagine a programmer saying they have "lots of code").
On the other hand, what little academic work on sales that is out there, is amazing, like Mark Leslie's Sales Learning Curve. Wouldn't it be great if there was research that used real data on the expected sales cycle, deal size and other parameters in various industries? Wouln't you want to have a framework for predicting deal close rate? I'm not suggesting that sales is a pure science anymore than, say, finance is. Go ask a stock picker at Goldman how much of her work is science a la Black Scholes options pricing model versus predicting the "mood" of the market (or getting inside information, as the case may be). And even if it were a pure art, surely we could teach it the same way we teach psychology.
I've asked this question of why sales isn't taught in academia and the most frequent answers I get are:
All of the above may have some impact, but my theory on the root cause is that there is a selection bias that draws people who are good/passionate about sales into....sales. And further, that those who would go on to be professors take a different track. Today, sales is learned using the time-honored master-apprentice model and it usually takes 10 years for an apprentice to "graduate" and learn the trade. At that point, they have another 10-15 years to "make hay" after which they're so out of tune with the academic world that they have no interest in trying to use the case method or lecture method to teach sales (plus they're fond of the apprentice model and probably are taking on one or more of their own). Similarly, someone who's gotten their undergrad, then immediately entered into a masters/PhD program is unlikely to be aware of sales and even if they are it's foreign. Their advisors are probably unfamiliar with sales so there's really no way for them to get a sponsored project. And alas, there we are...no one to teach sales in academia.
So what's the solution? Entrepreneurship. I think that enterpreneurship programs are just the departments to foster the study of sales...plant the seeds for using a scientific approach to studying and learning sales that could ultimately spin-out as a major discipline on it's own. Every professor that teaches enterpreneurship knows the importance of sales (the theory and practice) as it applies to new ventures. What's more, there are really passionate, successful enterpreneurs who could break the cycle mentioned about on how to fund/staff a sales department at a university. So here's my call to action. I think one or more enterpreneurs who came up through sales should step up and organize a lecture series on sales via an enterpreneurship program at Harvard, Stanford or some other school of similar stature. Let's use this as a springboard to bring sales into the academic fold.
Or perhaps Adeo at the Founder Institute will just do it outside the system!
I've mentioned this survey several times in the past, but this time I bring news of the 2010 survey opening to participants. This year the survey covers six countries (Canada, China, India, Israel, UK and US) in two industries (technology and life sciences). Each year, over 1,000 companies complete the survey, making it the largest of its kind. If you are CEO or CFO of a startup company in any of these countries/industries then I encourage you to participate in the survey. Ditto if you are a VC (I mean, ask your portfolio companies to participate). It doesn't cost anything to participate (other than the 30-60 minutes it takes to complete the survey) and the benefit is that you get the full results once they are published.
In years past, the results were published in a PDF and a hardcopy book, but starting last year the results have been published online via a password protected, members-only site (so participating is really the only way you can get the results outside of paying $1,000). In the audio/video tour of the site below, you'll see how easy it is to look at compensation by title, geography, financing rounds, headcount, founder status and much more. Furthermore, compensation is broken out by base salary, cash bonus, equity, severance, etc. Don't miss the opportunity to get the 2010 data...take the survey now!
Another benefit of taking the survey is that participants have access to other members (and a panel of experts) to inquire (anonymously if desired) about nuances of private company compensation.
Last year I wrote a post about WSGR's new term sheet generator and how that was part of an overall trend to "open source" the legal industry. Open source is the wrong term though; instead is probably better to say automate since LegalZoom and others are doing the same thing but commercially. I think this is great for end users both personal and professional, but I think it is going to seriously erode legal industry revenue in the long term. It's silly to pay by the hour to have the same documents generated over and over.
Another great example is a new tool I learned about today. It's a Terms of Service and Privacy Policy generator by Legal River. This is great for micro ISVs or small organizations that don't want or need to pay hundreds of dollars in legal fees to get a basic agreement in place. It's fast and easy to use and generates easy to use, copy-paste HTML. All you have to do is answer some basic questions and then voila, you have your nicely formatted agreement (which you can obviously edit if you like).
It looks like a great service. It's free and I'm sure I'll use it in the future.
This Thursday, December 3rd, the results of the 2009 executive compensation survey will be detailed and broken down in two 90-minute webinars (one each for Life Sciences and Technology). Over 700 companies in the US participated this year (the highest participation by a long shot in the 10-year history of the survey). Companies that participated in the survey have already received the results and this is the public unveiling to the rest of the world.
For technology companies (nearly 500 in total participated) about 50% described themselves as primarily in the "software" industry while 10% described themselves as in the "cleantech" industry. The latter is a dramatic jump from last year when just 5 or 6 percent identified themselves as cleantech firms.
As you would expect, there are a number of dramatic changes from previous years. For one, the base salaries and total compensation for non-founder executives, which had grown at a 5% CAGR for the past 9 years, screeched to a halt and had nearly zero growth (for Tech companies). Below is another interesting chart on founder equity for tech companies.
I've always found this chart amazing to me. Basically it says that "all founders are not created equal." If you're the CEO and a founder, then you median equity holding is 21%, whereas if you're CTO that number drops to 9%.
The 2009 CompStudy website has lots of little gems like this one. The new site is interactive and allows you filter and sort the results of the survey to get valuable cuts on the data (like show me founder CTO compensation in California for Series B, software companies with 40 employees and <$5 million in revenue.
Professor Noam Wasserman, J. Robert Scott, Ernst & Young and others are behind CompStudy. It's a long running project and is worth checking out.
Lastly, let me finish where I started. This Thursday there are two free webinars that detail the results of the survey which you can sign up for here. The webinar for technology companies is here and the one for life sciences companies is here.
A repost from the Viridus blog: Earlier today I was in the audience of students, faculty, local entrepreneurs and politicians at MIT when President Obama delivered a speech on clean energy. His talk was brief but made some notable points. The main point, I think, was him exhorting the country to "take a risk on ideas that might fail, but that could also change the world." Obama cited as examples some research at MIT where scientists are using viruses to grow batteries instead of building them. Pretty cool.
Obama started by touting recent achievements in advancing clean energy research and development. Apparently there is $80 billion of the stimulus money ear marked for green projects. And Obama mentioned Governor Patrick's tripling of investment in energy efficiency (the biggest short term opportunity, in my view). He then simultaneously held out a carrot and stick saying that the Pentagon had declared America's dependence on foreign oil a security risk and that there was a $2 trillion potential market in wind energy over the next two decades (Massachusetts just won some federal grant money to build a wind blade test facility).
I haven't read the press coverage on his speech yet, but I bet most will pick up on what he called the biggest obstacle to advancing clean energy legislation. What he called the "myth that there is little or nothing we can do; that politics is broken." I'm not sure that's the biggest obstacle, but it's real for sure.
He finished with some of the best lines of the speech saying that "Today's frontiers can't be found on a map" and that "pioneers are not off in the wilderness but all around us." How true. I see that on Viridus everyday where dedicated, passionate and talented professionals are advancing corporate sustainability. You can see Obama's speech streamed online here thanks to the good folks at MIT.
By the way, the legislation that Obama mentioned (but did not go into any detail about) was the Boxer-Kerry bill, proposed climate change legislation. I've embed a summary version below or you can click on the previous link for all 800+ pages of goodness.
The center piece of the proposed legislation is a cap-and-trade program where the initial credits are auctioned off. This would put a price on a ton of CO2 and would do so rather quickly, similar to RGGI, here in New England. Come join the discussion on Virid.us on how this proposed legislation would affect business and the environment.
Lastly, I just have to say that I was able to briefly meet the President and shake his hand which was pretty cool.
Last week I was back in Ann Arbor, Michigan for the first time in something like 12 years. It was at the request of Thomas Zurbuchen and Doug Neal who lead the University of Michigan College of Engineering Center for Entrepreneurship. I was asked to give a talk on entrepreneurship. The audience for my talk was mostly undergraduate engineering students but the topic was entrepreneurship and I decided to talk about my time at Michigan and how that trained me for a career as an entrepreneur.
Here's a link to a recording of my talk, complete with a simulcast of the slides.
There were six lessons that I talked about during the talk:
I used the context of my experience on the U of M solar car team almost 20 years ago to share some advice on how to address these topics. But I suppose the biggest, most important piece of advice I have for aspiring entrepreneurs is to go out and building things (and sell them). It's impossible in my view to learn to be an entrepreneur in a classroom (or reading a blog). The best way to learn is by doing.
The other funny bit of the story is that after I came back from Ann Arbor, I got requests from fellow solar car team members to share some of the photos I used in the presentation (it was mostly a slide show). In preparing to share them, I downloaded Picasa, a Google product. Picasa is a picture management tool and as it was searching my hard drives for photos I noticed a new "face recognition" feature. Well, long story short, this feature allowed me to find this photo below of the solar car team from about 1991 which includes a young Larry Page, co-founder of Google (I'm in the bottom right in case you care!). Somehow it's ironic that Google allowed me to find its co-founder in a picture that I've had for 18 years and I've looked at many times before.
Once again, here is a list of some of the more popular posts on this blog. The two most popular posts remain this one on term sheet negotiation and this one on venture debt, although this one on convertible debt
is giving them a run for their money. I'd like to take this
opportunity to thank all of my readers, particularly those who have
voted, commented or contacted me about this blog...your interest is my
motivation! Raising Capital: Startups:
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