Category: Startup Life

Kapost Team Growing

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We took a group photo on Friday here at Kapost: 

Looking at this photo and seeing how far we’ve come makes me think back on what’s different now: 

More Great People: We’ve grown from 12 people a year ago to over 50, and have added some amazing people to our team.  From Riley to Jace to Patrick, the number of quality folks roaming our office is incredible.  Our engineering and product team is full of A-players.  Our marketing team is full of innovators.  Our sales team is full of killers. This has been the biggest and best change. 

Great Leadership: My co-founder Toby has really become a great leader and has a real knack at being able to point the ship and get all groups working towards a common goal.  Similarly, my other partner, Nader, is a joy to work with as well. Having someone who can ensure that the Kapost technology is top notch and moving in the right direction and do it in such an effortless way is awesome.  They both aren’t afraid to challenge the team, to hold true to their convictions, and to do what’s right. 

Good Discussions: We also had a board meeting last week where we went through all the areas of our business and how they’re doing.  We’ve recently expanded our board to include Paul Bell and Alex Shootman and as a result these sessions generate some great discussions about how we attack the market and grow faster. 

More Specialized:  18 months ago we were only 12 people.  At that time people wore lots of hats.  At the time, I ran the product group, ran HR, ran account management and participated in sales. Now that we have more people, we can afford to have specialists who are top in their field.  As a result, all of us are going deeper in our areas.  It’s nice to be able to focus, but it’s quite a difference from when I was able to see and hear and participate in many other parts of the business. 

More of more and more.  There are lots of new things. More dogs. More bikes. More GIF’s. More biking rides up Sunshine. More meetings and more meetings.  There are challenges, but that’s why we do it and why it’s fun.  We’ve grown a lot and I’m enjoying it immensely.  

Product Stuff at Kapost

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As Kapost grows, I really aspire for us to continually get better and better at what we do.  I ran the product group by myself for so long that i’m really excited to have more kickass folks on the team now (Anthony, Niraj, Eric, Jace).  With this extra firepower, we are able to do some really cool things and we’ve done some recently.  

First, customer development.  We’re taking this to another level. We’re talking to customers more and more. We need to. As we get more customers, it’s harder to know if your roadmap is what they want.  Also, our product is getting more complex so the feedback has more breadth.  We’re off to a great start in 2014.  We had a Kapost conference in SF a few weeks ago and Anthony and I flew out there to talk to over 20 customers.  We talked about new features coming out and our upcoming redesign.  We got some great feedback. 

In fact, it worked out so well that we even had one of our customers write an article on Inc.com about how much she loved talking to us.  You know you’re doing something right when a customer starts thanking you for listening. 

Inc Mag article about Kapost

Second, we’re finally putting goals and metrics on product releases.  I’ve been thinking about this for a long time, but we’re actually doing it now.  Here’s the deal: when you’re planning a feature or new product, we (the PM’s) attach what success means for that product 8 weeks after release.  For one feature it means usage by 50% of customers 8 weeks after release.  For another, we had 10 customers asking for it, so we considered it a success if 7 of them using it regularly 8 weeks after release.  There’s lots of talk about customer development, prototyping, MVP, and agile methods, but much less about the followup that happens once a product is released. 

Our engineering team is evaluated by shipping code, but we’re evaluating our product team by whether or not they are hitting the success metric.   This has resulted in some interesting behavior in the product team such as: 

  • when a product is released they are much more inclined to explain it to the sales and customer success team so customers will know about the feature and use it
  • if a customer asked for a feature, they then make sure that the feature is adopted before moving on and if it’s not adopted, figure out why and fix it. 

After a product release, a feature should be adopted and hitting its goals.  If it’s not it’s either because the requirements were bad or the implementation is bad.  Either way, tracking the adoption is necessary.  This rigor is new to Kapost and already is paying dividends.  I have another post coming soon about why Mixpanel and Totango are great for tracking.

As Kapost grows (we’re now over 50 people), the teams get bigger and more sophisticated.  Lots of founders dread the growth because they no longer can have their hands on everything.  For me, i’m loving the growth of the company, the team, and our ability to do more. 

 

The craftsmanship between a great idea and great product

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Saw this from Dixon’s blog over the weekend. It’s a good clip from Steve Jobs in 1995 where he talks about how building great products and thought it was worth a repost.

As the head of Product at Kapost, it really resonates to me as we often start off with a product idea and through months of discussion and design, come out at a different place – one that is always better than where we began.  I also like the talk of keeping things out of product.  In my opinion, that’s one of the hardest part of design product – trying to intentionally remove or not include parts that customers claim they want.  

The Jobs quote:

 

There’s just a tremendous amount of craftsmanship in between a great idea and a great product. And as you evolve that great idea, it changes and grows. It never comes out like it starts because you learn a lot more as you get into the subtleties of it. And you also find there are tremendous tradeoffs that you have to make. There are just certain things you can’t make electrons do. There are certain things you can’t make plastic do. Or glass do. Or factories do. Or robots do.

Designing a product is keeping five thousand things in your brain and fitting them all together in new and different ways to get what you want. And every day you discover something new that is a new problem or a new opportunity to fit these things together a little differently.

That’s one thing I love about product.  You need to understand design, your business, competitive landscape, your customers, technology and how to get things done.  It’s one of the more interdisciplinary roles a company has. 

 

Two Pieces of Business Advice

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An employee recently left Kapost (sad to see you go T) and i was out to lunch with her and she asked some advice. I thought back to two pieces of advice that I was given or things that i have witnessed from successful colleagues.  Here’s what popped up:

“90% of Power is Taken not Given”

This is a quote from my old boss Bill Raduchel.  Bill loves saying phrases like this to me, and this was one juicy nugget he spat out in 2002 when I was working at AOL.  I took it to heart. I was a product manager at the time and aspired t

Bill at the Inn at Little Washington

o have even more responsibility within the company.  He noticed that and delivered this great quote.  What he meant was that nobody is going to give me extra responsibility.  If i want it, i have to go take it and earn it.

That’s what i did. I wanted to run video services within the company.  There were lots of people running bits and pieces but nobody was owning it.  Instead of waiting for a title and position to be created, i just started acting like i was the defacto video product manager. I had weekly all-hands meetings with the other stakeholders, came up with a product roadmap, and basically acted like the product owner.  What happened? Eventually the company realized i was the product owner and rewarded me with that title.

In small companies there are too many things to do.  In big companies there are lots of ambiguity, swirl and gray space. In both instances, there’s an opportunity to do what you want.  Just be proactive and go do it.  In real estate, ownership is 9/10 the law.  In startups, doing is 9/10 the position.

Don’t Eat Alone

This is just something i’ve realized. Most of the people we hire at Kapost come from referrals.  Most of the opportunities i’ve been given in my career come from contacts of friends of friends.  The size and strength (i.e. authenticity) of your network matters in today’s work world and in your career.  I’ve seen people (Nick O’Neil) go crazy about this where they actually track in a spreadsheet the people they’ve met and want to keep in touch with and make sure every X number of days that they give them an update.  It may sound excessive but it works.  He has a ton of connections who regularly help him out.

There’s even a pretty good book, called “Never Eat Alone” which talks about the power of these connections.

Those are two things that immediately came to mind.  I’d be curious if any of you have heard any other nuggets of great advice that you’d like to share.

Things I’ll Remember About 2013

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2013 was an interesting year.  Here are a few of the things I’ll remember about it:

Diane and I bought our first house.  After 3 years in Denver, we moved up to Boulder and bought a nice little house in North Boulder.  It’s the perfect size and location.  It’s close both to downtown (where we work) and the mountains so our commute is nothing and we can walk to the hiking trails.  It’s a huge game changer.

My stint as a single parent.  I’ll never forget the 10 weeks I spent taking care of Hunter.  The baths, the feedings, the walks, the coordinating with the nanny – I got to really understand what it’s like to be responsible.  I really think it’s made me a much better parent now having that experience.  It also made Diane really happy which makes me happy.  I love it when she  shines – there’s nothing better. 

I lost 20 pounds.  During that time with Hunter, i got into a running routine and ate a bunch less for dinner, and as a result i dropped some serious weight. Although i put some back on over the holidays, it was game changing for me.  I feel a lot better both physically and mentally.  I’m still keeping to the 4x a week routine and should be able to keep the weight down to 170-175 (I was at 193)

This past year was a pivotal year for Kapost.  We really grew the business and we hired some incredible folks.  We went from 13 people to 42 and from under 400k in revenue to 1.8MM. 

The Boulder flood was an incredible experience.  Seeing that much rain and what i can do to a town is frightening.  It destroyed our basement but nowhere near what it did to others.  Seeing a rush of water crush down your front door is a nightmare.   Here’s a video of a friend’s apartment building where they all had to be rescued from the second floor. 

Becoming an uncle. I’m so happy for Liz and Mike.  Knowing all the crap they went through to try to have a kid, then to finally get pregnant, then to have such a beautiful girl come into the world – I’m so happy both for them and for me.  It’s really fun having that girl around and i can’t wait for Hunter and Reagan to become friends. 

Those are the things that pop out in my mind in 2013.  Here’s to a great 2014!

 

Growth vs. Profitability and Kapost

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One of the more interesting learnings I’ve learned at Kapost is what makes SaaS business models work. Related to that I often get the question asked to me, “How is Kapost doing? Is it profitable yet?” implying that if it isn’t, things are bad and if it is, then things are good.  This post is an attempt to address that question.

When talking about a company’s performance, I’ve noticed that you have to talk about both its growth and profitability, and discussing just one in the absence of the other is dumb.

I recently did a post comparing Salesforce and Linkedin.  You’ll notice in there that neither company is profitable yet both are worth over $30 billion dollars.  LinkedIn makes a $1 billion a year in revenue, whereas Salesforce does $1 billion a quarter ($4 billion a year).  Why are they worth the same?  Because LinkedIn is growing at 60% a year whereas Salesforce is growing at 30%.

To investors, companies are worth what their cash flow is going to be in the future – not what it is now.  That’s all they care about.  If they think the cash flow will be huge, the company will command a huge valuation.

Let’s take Amazon.com as an example.  They have had no profits for years, yet it’s currently worth $166 billion.  One analyst even jokes about it, writing:

With every Amazon quarterly earnings call, my Twitter feed lights up with jokes about how Amazon continues to grow its revenue and make no profits and how trusting investors continue to rewards the company for it. The apotheosis of that line of thoughts is a quote from Slate’s Matthew Yglesias earlier this year: “Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers.”

The point here is that you need to understand why any company is not profitable. In the case of Amazon, it is making huge investments in warehouses to grow its retailing business and huge investments in data centers to grow its AWS business. It could stop making those investments and start generating profits. But doing so will sacrifice growth in the market they current work in.  Amazon’s doing $70 billion in revenue this year and did $34 billion in 2010.  Here’s Amazon’s revenue since 1996:

That’s doubling in 3 years.  That’s pretty amazing.  I’m sure it’d be worse if they were focusing on profitability.

What does this mean for Kapost?  Kapost has established itself as the market leader in content marketing software and hit profitability early in 2013.  However, we desired to grow and grow quickly.  Thus, we raised a round of funding and are using the those funds to accelerate our growth.

Why can’t we grow organically with our profits?  

The way SaaS businesses work is that they face significant losses in the early years because they have to invest upfront to acquire customers, but they recover the profits from that investment over a long period of time (the life of the customer).  What’s somewhat strange for people to understand about SaaS businesses is that the faster the business decides to grow, the worse the initial losses become.

For example, imagine a world we you spend $6,000 to acquire a customer, and then charge them $500 per month.  For one customer, you’ll get the money back after a year, but you need $6k up front first to get them.  And, if you want to grow faster and get even more customers, you have to spend even more money.  The graph below shows that the more you spend, the better the rate of growth is.

This is why Kapost did another round of funding.  Going forward, as long as we’re accelerating the rate of revenue growth, we’ll always be needing more money and more money that we’ll need to fund that growth.  That is, unless we don’t want our rate of growth to increase.

Now, of couse, profits are critical to the health of a business.  The key is to be able to be profitable if we want to be and to be profitable at some point in the future, at least hypothetically. So, when you hear that a company is losing money, don’t read that as a necessarily bad thing. It could be a very good thing. It all depends on why.

———

Notes: Here are some good posts on this topic that helped me out:

  1. David Skok is awesome.  I stole his graph and a lot of his thoughts.
  2. Wikivest
  3. From Eugene Wei’s blog
  4. From Fred Wilson’s blog

 

 

Trying to Reach the Sun

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Starting a business is hard.  There’s always the fear of failing and when things fail, the idea that it was all your fault and you could have done things better. It’s a shitty feeling.  That’s what struck me about this poem below was it celebrates the accomplishment before the failure.  I often think about the skiing mantra, “if you’re not falling, you’re not trying hard enough.” 

So, to all of you who are trying to reach the sun like Icarus, bless you, and keep on flying…

Failing and Flying

Everyone forgets that Icarus also flew.
It’s the same when love comes to an end,
or the marriage fails and people say
they knew it was a mistake, that everybody
said it would never work. That she was
old enough to know better. But anything
worth doing is worth doing badly.
Like being there by that summer ocean
on the other side of the island while
love was fading out of her, the stars
burning so extravagantly those nights that
anyone could tell you they would never last.
Every morning she was asleep in my bed
like a visitation, the gentleness in her
like antelope standing in the dawn mist.
Each afternoon I watched her coming back
through the hot stony field after swimming,
the sea light behind her and the huge sky
on the other side of that. Listened to her
while we ate lunch. How can they say
the marriage failed? Like the people who
came back from Provence (when it was Provence)
and said it was pretty but the food was greasy.
I believe Icarus was not failing as he fell,
but just coming to the end of his triumph.

You’ll Never Make Money with a Music App

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I’ve said this a million times and i’ll say it again for the record.  If you’re a music internet application and you have full music streams, you’re not making any money.

I was reminded about this again today when i read this article about Spotify:

Spotify’s 2012 results are out today, with Reuters reporting that the private company had revenue of 435 million euros, and a 58.7 million euro net loss.

The revenue figure is impressive, more than doubling 2011′s 190 million euro tally. However, the company’s net loss widened in the year, even as it saw a dramatic expansion of its top line from 45.4 million euros to the aforementioned 58.7 million figure.

For some background, Toby and I founded the music company Qloud back in 2006.  We had 20 million monthly users, did over a million streams a day, and were acquired by SpinMedia.  But, given that kind of traffic, there was still no way we could make money.  Let me explain why:

  • If you need music for your product, you need to sign contracts with the major music labels. There are 4 of them. These labels require upfront payments of around a million dollars a one or two year deal (at least at the time they did). Your payments to them are then debited out of those upfront payments.   So, you need a good amount of capital to even get started.
  • The major labels have seen big tech companies receive big payouts (such as Last.fm’s $200 million exit) and are upset that tech companies are making money while their business erodes.  As a result, they want equity in any company they do a deal with so they can share in the upside.
  • The major labels do not think the success of your company is due to your product chops or your ability to market well.  No, they believe your success is due to the quality of their content.
  • This is the most important one: Your contract with them is for one or two years.  If you report a profit at the end of the term, they will interpret that fact as their cut is too small and you can expect to pay more in your next deal.

That last point is the key point. You’ll never make a profit.  They will never allow for it.  You’ve signed a deal with the devil and unless you can have a product that doesn’t rely on a mainstream back catalog of music (i.e. eMusic), you’re screwed.

So, while i love Spotify and Rdio and use them all the time, don’t expect them to IPO any time soon, or ever.

Steve Case on Immigration

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I had the pleasure of working closely with Steve Case the Revolution gang back in the Qloud days.  I can tell you first-hand that he is the real deal. He made an appearance yesterday in the Senate and spoke about immigration.  Here are some of his statements.  All pretty interesting: 

1. “Today, 40 percent of Fortune 500 companies in the United States were started by immigrants or the children of immigrants, employing 10 million people across the globe and doing $4 trillion in revenue. Of the 10 most valuable brands globally, seven of them come from American companies founded by immigrants or their children. In the past 15 years, immigrants founded one quarter of U.S. venture-backed public companies.” [Source]

2. “Statistics show that immigrants are almost twice as likely as US-born workers to start a  company. Between 1995 and 2005, half of Silicon Valley startups had an immigrant founder. In 2005 alone, those businesses achieved $52 billion in sales supporting 400,000 jobs. In 2011, more than three-quarters of the patents filed at the top ten patent-producing US schools had an immigrant inventor. Of the 1,600 computer science PhD graduates from our universities in 2010, 60 percent were foreign students.” [Source]

3. “The mistake that opponents of immigration reform make is believing that our society and economic growth are zero sum. They are not. More talented immigrants joining the American family does not equate to fewer jobs, it equates to more jobs.”

4. “It is not the case that an increase in foreign talent will increase unemployment for native workers. Studies show that from 2000 to 2007, every 100 additional foreign-born workers in STEM fields created 262 additional employment positions for native US workers.” [Source]

5. “Every year, arbitrary immigration caps force approximately one-third of the 50,000 foreign-born STEM graduates from our universities to leave the country. After earning a Masters or PhD from universities such as Stanford, Carnegie Mellon, and MIT, these talented men and women move to competitor nations and launch businesses abroad that compete with our workers here at home. If our military had a similar policy we would train soldiers, sailors, and pilots at West Point, the Naval Academy, and the Air Force Academy with world-class battlefield skills, only to send them away to join the militaries of foreign nations.”

6. “What was once the secret sauce of our economic advantage – a strong entrepreneurial economy that rewards risk, disruption and innovation – is being replicated aggressively around the world. A few decades ago we lost ground in the manufacturing sector when we failed to respond aggressively to global competition. We cannot afford to do the same when it comes to the entrepreneurial sector.”

7. “History teaches us that the most open and inclusive societies tend to be the most successful: Spain in the early 1400s pioneering navigation and global trade; Italy in the 1500s advancing science and learning. But no country has benefited more from immigration than the United States. We began as a startup founded by immigrant settlers who left a difficult situation to build a better life. What distinguishes us is that we have always been a magnet for risk-taking men and women from across the world hoping to start businesses, innovate, and contribute. That is part of our DNA. It is why in the 20th century we created more wealth, opportunity, and economic growth than any other nation.

But that advantage is slipping away. As the economies of developing countries mature rapidly it is no longer the easy choice to settle in the United States. There are now increasingly attractive opportunities abroad. We must improve the environment for entrepreneurship to thrive. Now is the time to work together and pass comprehensive reform that fixes our high-skilled immigration system.”