We have mentioned before that our company is interactive, with senior people, experienced people, long term people. Then why do they behave like a dozen third graders faced with eight cupcakes at a party on a hot day?

We have three competing UI designs for our new product around helping people use social networking sites more effectively. It’s kind of a tricky thing to make it all look simple without removing a lot of flexibility. And we all understand the problem space very well.

We have lined up a dozen or so beta testers from both our new potential customer pool and some of our existing customers who want to expand into this area. Everyone has read the beta interview documents and seen the ‘pitch’ documents.

So we’re all on the same page for what we’re solving, who we’re solving for, and what the challenges will be.

As a group I think we concluded today that (a) these designs stink, (b) you stink, and (c) no, you stink.

At times like this I itch to just choose one and steamroller everyone. Unfortunately that tends to produce embarrassing failure, so I don’t intend to do it.

I think tomorrow we may try to vote one of the two designs out so that we have two, combine the teams around differently, and see what we can get by Monday. I guess the good news is that everyone is using *almost* all the same Ajax libraries so if the “Bowling Bozos” (they pick their own team names, don’t blame me) want the cool right-click-picker from the “Stumbleupon Bums” (bad puns-R-us) the that should go fairly well.

Stay tuned.

I realized today I was talking too much. It’s easy to do if people are paid to listen to you. No matter how independent they are, they will defer to you when you’re talking. So today I basically shut up so that they’d hear me better.

In the spirit of that koan, I’ll keep this post short. For a change.

I learned a long time ago with my worst-boss-ever (Adrian, I still hate you, it’s been 10+ years. You’re amazing me even today.) that the more she talked the less I heard her. I so despised her that I was able to spend most of my time in her meetings thinking about how to decode her.

So I ended up learning a lot.

Like when she’d come in and listen I noticed that when she finally said something it was really worthwhile. I noticed this because she was usually channeling Dilbert’s PHB with Catbert DNA injected.

So today we had a fair number of meetings and I sat back to listen. I even did scribe once (boy, does that job stink!) so they’d get on without me.

It was great for me - I learned a lot, and I think my folks enjoyed it more than usual.

I was tired though - it was hard work not talking.

I wrote an article on my SEOMoz blog about how if you were smart you’d Outsource Your Business. Do I feel stupid as we watch a major player screw up the most important cyber shopping day of the year for 25,000 merchants?

Nope.

Look, without Yahoo (or someone like them) let’s say 80% of those people wouldn’t be on the internet with anything but a (shudder) 1&1 hosted brochureware site with an 800#. Not that there is anything wrong with that.

Floods happen - does everyone leave Louisiana? Earthquakes in California. Hurricanes in FL.

It’s not going to get a lot of press, but I’m sure thousands of small shared servers in places like RackSpace, CariNet, Verisign, GoDaddy, etc went down today too. I bet just as many individual merchants lost their stores on the thousands of small hosting companies as did on Yahoo.

I would still argue that, on a risk management basis, you are better off trusting someone like Yahoo to do for you than you are trying to do it yourself. You gonna get a server, a dedicated RoadRunner line, etc and do your own hosting?

No, of course not.

Let me just say that maybe Yahoo could have done a better job - we don’t know what happened yet - but I’m sure they were paying attention to the problem, which is certainly more than most businesses could do.

We recently decided to launch a new product on a non-redundant server because we’re pretty sure demand is going to ramp pretty fast and we’ll need to move it up to a much larger set of multi-processor boards with dedicated hardware firewall connections. Those will have redundant power supplies and the full raid and NAS backup. So we’ve decided to take the risk of an early life failure around launch to save $50K.

If we’re wrong we’ll learn from the mistake but we won’t feel like we made the mistake by misunderestimating the situation. I know the small merchants at Yahoo are feeling the pain, but they weren’t wrong to outsource to a major vendor. And most can’t afford a contingency plan, so they are not wrong to not have one.

I think this falls under my Grandfather’s category of “I bet that hurt. Pull your socks up and get on with it.”

I will never forget the first time I told a boss we had to choose between which of my top three deliverable and he told me that all three were my #1 priority. I was at the stage of life where that kind of thing would make me go get drunk.

I was also at the time of life where a greasy diner breakfast would put my hangover right. I’m way to old to recover in a morning (sometimes it takes days) so now I’m more careful about getting into a triority corner.

You know the old saw: Fast, Cheap, or Good - pick any two. In reality you can only pick one but clients and circumstances often force you to produce all three.

Like with project planning, where you can only save time early, you can only avoid a triority by spotting it’s evil smell early.

For example, once I had a client trying to launch a major internet product more quickly by pinching off a division as a startup. Stop laughing, it was not my suggestion - the Bain guys sucked $2M out of them for that sterling piece of advice. So there they were, trying to coordinate an IT mentality, a corporate purchasing department at a remote location, a tricky technical product development, and a changing market.

Triority forming: late product changes, delayed hardware, and inadequate tech guys. About six months before launch I got the CEO to approve a “tiger team” to build a “prototype Release 1A” and, surprise, we ended up with a remote data center (remember Qwest?) with HUGE machines and GULF sized bandwidth. We were a dozen days after the missed initial product release in launching “Release 1A” but the in-house team took six months to turn the real release on.

Sure, the marketing guys hated me (nothing was on time, the messaging didn’t match, etc), but we avoided a triority: change the product, release it on time, and there is no hardware. All perfectly predictable if you’re paying attention, but only something you can deal with given plenty of lead time.

I suggest you consider looking ahead at your own project - are there a series of conflicting factors coming together? It’s not like inventing the next flavor of lip gloss - it’s always deadline, feature, or people related. Or all three. And marketing, sales, and corporate are always involved. Sometimes all three. Are there consultants in-house? They’re involved.

Once you see the nexus forming you can decide what to do: avoid it, bug out, or be in a position to rescue it. One thing you cannot (CAN NOT!) do is prevent it from happening. The inertia of any organization is much greater than your ability to shove people around.

Ok, you’ll try, we all do. But please have a backup plan. Remember, you can avoid, run, or be ready to fix. Hey, that is a triority of options!

Over at SeoMoz one of the better blog posters, Vingold, has a really good article on 4 Things That Are Wrong With the 4 Hour Workweek.

Of course, besides some of the get-rich-quick (how does that work again?) schemes in the book, the real problem is that after some period of experiences you can’t actually learn much that is actionable from a “normal” business book.

True fact, as my kids say.

Look, Jack Welch is 100 smarter than I am, with 2,000 times more drive, and is worth 30,000 times as much financially. (On the other hand, I still have my first wife, so I’m clearly wiser than he is!) And I read his book(s) and his articles in the biz journals. And I learn almost nothing actionable each time.

What does that mean? Well, Jack put in a 10 year quest for “six sigma” quality. I actually know exactly what that means and used to work in a manufacturing company. Completely useless for my business though. And Jack talks about creating a culture of management excellence through hiring practices and sophisticated 360 degree peer reviews, blah, blah, blah. For a SME that is about as useful as government health reform.

And Vin puts his finger on that exact issue with this “4-Hour-Workweek” thing:

For instance, in the best chapter of the book, titled “Outsourcing Life,” he says essentially this: “Never do a task yourself that you can delegate. Never delegate a task that you can automate. And never automate a task that you can eliminate all together.” You can read volumes of management and business books, and you’d be hard-pressed to find more concise and complete advice on streamlining a business.

That is probably the only thing in that whole book that would have been useful for me to read. (Thanks, Vin, you saved me a ton of time!) Read a whole book for that advice? Wow, what a waste of time.

(One of the things I do when I find a thing like that is to put the book down and try it immediately. I’m a quick twitch Terrier kind of guy, so it is use-it-or-lose it for me. So, even though I think I already to to avoid getting tasks completed the hard way, I’ve just gone back over my daily to-do log and looked for things that really didn’t need to get done. I found a few, maybe there is a pattern in there where I could save myself an hour/month or so. Which is pretty good improvement.)

One book I do read on an annual basis, and have for 20 years or so, is DeMarco and Lister’s Peopleware. It’s not a techie book, it’s about helping people be successful in your organization. And though it was written for the tech industry, nothing in it is dated. Chock-ful-O-wisdom and actionable ideas.

I admit it - I don’t get chair rash on my bum at work anymore. That is because I have to go home and do hubby/kid stuff. And I try to make sure my managers force people to work reasonable hours when we’re not, you know, actually on fire.

So I don’t worry too much about the attitude of the guys who are still there when I leave. They know I’m on email and reachable by phone if they need me. I also work some pretty fierce late night and weekend hours to make sure my administrative and project stuff is ticked and tied. And my guys know that - I lead from in front. You have to.

How do I know they’ll wind it up and leave at a reasonable hour. I can see the key card and alarm logs over the internet, so I can pull a spreadsheet of at-work hours once or twice a month. I figure if someone is at work for 60+ hours then we’ve got a problem. I’ve never actually found someone working too few hours.

We do have one guy who is not at the office as much as I’d like, but he’s super productive, so as a small company we have lots of latitude. Probably because he’s careful to show up to scheduled meetings we’ve gotten smarter about scheduling meetings. I do know he’d be more senior in the organization if he were around more - he misses the hallway techrock talk where he could show more leadership. I suspect he knows that, so there you go.

You may recall that I just wrote a post about how my Thanksgiving present was a buncha guys who were ahead of schedule. And I can look at the daily revenue numbers and see that we’re on track for our financial numbers (not that here is much you can do about that this late in the year!). So everything is going well, and everyone knows that.

Then why where there four people in the office when I dropped by today to pick up the “extra” frozen turkey? It was kind of funny: they all scattered within three minutes of me showing up for work. I’d made this rather serious edict about taking a four day weekend without email, etc. If they’re emailing each other on project stuff (as opposed to the stupid jokes they keep sending me) then they’re smart enough to keep me off the CC list.

No, I don’t actually have an answer as to why they were here. And I won’t ask - I don’t need to know the answer to everything.

When I left I did put a note on the door saying: “Go home. See you MONDAY.”

Something spooky is going on. This project is going too well. Clearly I’ve turned into the brain-in-a-jar from Mars Attacks.

Seriously, our technical teams have jumped ahead of schedule on infrastructure and user system design. The documentation guys have finished two pieces that aren’t due until next week. Project stuff is not supposed to go well towards the end of the project.

The backoffice team has completed moving our bank, changing our payment gateway, and changing our internet merchant account. Nobody fixes banking stuff the in the days before thanksgiving. (I figure we’ll save around $100K because of the work they’ve done over the last few months to ‘fix’ our rates. Nice! Money for old rope indeed.)

Our database guy and our lead technical architect got together and figured out an easy way to bring a V/2 feature into launch. I told them to stop because we didn’t need the risk and they laughed at me and told me that it was easier to build it in now because it made several other features almost free. Then they made fun of me for being staid and boring. Then they practically skipped out of the room.

These guys look like trolls with masters degrees and generally walk around muttering big-L libertarian curses against the system and cracking complicated Tolkein puns. They do not hop around the office grinning at how smart they are.

So clearly someone has sprinkled some weird anti-tryptophan laced fairy dust on my team.

I love startups. Complete rebellion in the ranks due to over-performance on stretch goals.

Happy thanksgiving everyone. Spare a thought for our guys in the sandbox.

Not that you should actually let your mom invest in your startup, but if she insists that she wants to be in on the “A-Round” she’s going to get crushed on the professional B-Round.

We talked earlier about VC term sheets and about how you can’t really negotiate your term sheet much at all. So what does that mean for your Angels who bought in an A at $5M pre-money?

Better hope they are as unqualified as your lawyer let them be for SEC purposes. Because they’ll just look at the $10M pre-money and think they doubled their investment. Given the grind, warrants, and preferences the VC’s will insist on it’s more like they have 10% as much juice. If the company is *really* worth $10M pre-money now that’s cool and it was almost certainly not worth $5M before, so it’s hard to say if they now finally have an ownership stake in something real or not.

There is another interesting issue in here - how much money *did* you raise? There is this mantra that people have: look for money early. And it is true. But you still don’t get the money until you’re basically broke anyway. Think about it from the VC’s point of view - would you give you money before you really needed it?

Wrong answer. Remember, they want a business that will sign the worst possible term sheet. When will you do that? When you have to make payroll off your home equity line. At that point you’ll really sign anything.

So I would suggest raising a small(ish) amount of money during your angel round (if you raise at all) so that your burn rate stays as low as possible No need to take a bigger hunk of your life’s savings (remember, you’ve already burned Mom and her bridge club) than necessary to make payroll and rent.

The other good part about being broke is that it teaches you to be cheap. Copier? Stupid, get a cheap fax machine. Coffee service? Mr. Coffee from Wally World and Sams Club blend. Desk from the supply guy? Hello, used furniture or Sams/Costco. All this will be good training for when you’re running tight on cash.

This has been a bit rambling, but it’s all linked in my head. Take money from Angels with the idea of getting pro money and you’re screwing them. If you have a lot of money you’ll just spend it faster. Cheap is good. I see the thread, do you?

When you start your first company you have some advantages - youth, energy, and a good credit rating. (Probably you also have hair and can see your feet while standing.)

If your business fails you probably wouldn’t really expect to exit with good credit. I mean, there is no doubt that there will be business and personal bills piling up while you Slim Pickins your bomb on down. And good on ya, nothing wrong with that. And since you made that choice, I’ll buy you a drink, slap you on the back, and commiserate with you.

But if you get VC money you would expect to come out of a failure pretty well unscathed. I mean, after all, they are the majority owners, they have control, they have all the money.

Let me wipe off these tears of laughter, m’kay?

Do not for a second think that you can present your final expense report to the VC’s and get it paid. “But they said to come out to San Fran for a critical meeting!” Right. Tell them to get you a pre-paid ticket and you’ll see how important it is.

All those corporate cards your sales guys have? All those desperate last minute trips to clients to close a deal, any deal? Guess who is gonna get stuck with the bill when the company goes down?

Remember, once you declare bankruptcy you don’t have a ton of freedom in how you spend your money. I’m not a lawyer so I’m not going to give you the definitive answer, but I will tell you that employee expense accounts (in my state) are treated as unsecured debt and are paid well after secured creditors. At best they’ll get pennies on the dollar. The courts in my state can also claw back payments made up to 60 days before bankruptcy. And they do.

So it’s not just you, it’s your employees too.

Why am I picking on the VC’s CFO? It may not be really fair, but my experience, and the people I know report the same thing: when money gets tight you can count on the VC’s that control your board to start making changes. And one of them is often to take control of the remaining cash. Reasonably enough. (And they boot people, also reasonably enough.)

And the CFO is gonna drag their feet on paying certain bills. You can’t kite checks, but you can pay slow. Really, really, really slooooooowwwwwww.

So if expenses are getting paid slow and the company is in a death spiral, you might want to consider how to ameliorate the damage to your credit rating as you simultaneously lose salary, healthcare, and inherit a big credit card bill.

Good luck - it can be done. Or at least you can be prepared.

=====

Bump and update. Someone sent me a funny email, started with “Bitter, table for one!” I’m actually not bitter because I did it to myself the first time and the second time I was protecting three of my sales guys. I’m just putting it out there for you to ponder.

Update 2: someone pointed out in comments that I had confused Slim Pickins and Tex Ritter. Oops. Fixed.

Well, not actually eat since there wouldn’t have been an receipt for an expense report, but they did try to hire them.

I’ve talked to other entrepreneurs and they have reported similar experiences. You go in and do your pitch. You know the drill - polite interest, somewhat random questions from the recent MBA grads gunning for a partner slot, promises to call, etc, etc. You pretty much know the next stop is the closest place you can purchase alcohol based numbness. Then one of the older guys takes you aside.

“Have you ever seen a grown man naked, Timmy?”

Sorry, that was Peter Graves in Airplane. What he says is: Do you think you’d be open to looking at one of our other portfolio companies?

I swear to god, the first time that happened I thought they wanted me to do some consulting. So I said “Sure” and was horrified when I figured he wanted me and my tech team (but not my co-founder) to dump our current company (and investors!) and go fix some POC company that simply couldn’t deliver. I was horrified, and offended, and felt stupid because I just didn’t get it at first. I still remember the stupid feeling, actually.

This happened several times. It also happened after an on-site Dog And Pony when one of the VC’s made a move on my technical team. They all forwarded the emails to me - they wanted to know if they could flame the sender. I told them go-ahead and they spent a happy few hours using the thesaurus to find high falutin words that meant: jerk.

The last time that happened to me was in England and I just blurted out: This is some kind of test, isn’t it? They assured me that no, it wasn’t - it was just an easy way to recruit management.

We’ve talked about the risks of taking venture money and the difficulty of negotiating your term sheet. I guess you can add the worry of losing key staff during the run up to taking the money!