Management Experiment at Architel
December 31, 2007
Architel is the engine that has allowed Scott and I to fund more than five other businesses/initiatives since 2001. This little IT services company was founded with a simple idea: align the interest of the customer and the IT provider; we seek to accomplish this by providing all-you-can-eat support for a flat-monthly fee. In 2003 I took over as CEO and by the end of 2005 I turned over the reins to Scott Ryan.
Stowe Boyd is writing in a post titled ‘The Cult of the CEO Gene’ about Gary Hamel’s new book. The premise is that, "American companies need to respond to new challenges in the global economy by rethinking how they are organized, in essence, allowing — or encouraging — power to migrate from the center to the edge."
Ironically, in a way this is how we have orgainzed Architel for 2008. Back in November Brad Merritt, who has joined the team to build WhiteBox, recommended we move to team based management at Architel. He saw the problems our centralized control system caused, specifically as we grew past 100 clients accountability degraded significantly. We divided the company into four team, each with an equal number of clients. Now we have four mini companies operating under the same standards and guidelines, but specifically responsible for their assigned customers. Two of the teams have been experimenting with ideas that would have been too scary to adopt companywide. Some of those experiments are working and others are not. The interesting thing is that we are seeing innovations being developed at the edge ~ something that rarely happened before.
I will be writing about our experiment throughout 2008, but in the meantime check out Gary’s book, The Future of Management.
Could a Facebook get funded in Dallas?
December 30, 2007
More and more investors on the East and West coasts are taking lots of small risks on lots of startups. In the not to distant past, venture capitalists were hesitant to make small investments. They argue they would rather invest $5,000,000 than $500,000. Why? Easy, there are only so many hours in the day and the traditional VC model of hands on involvement meant a partner could only invest in ten or so companies at a time. Read more
Last post of 2007!
December 28, 2007
Can you believe there are only two more years left in this decade? Where did it go? My son is six and, God willing, Michele and I will be having a baby girl on January 2nd named Erin Elizabeth Muse (the domain was already taken, but Michele liked the name so Erin will have to settle for .net or .org or something). I have so much to be thankful for!
In any event, I wish you all a happy new year. Benjamin Franklin said, "Be always at war with your vices, at peace with your neighbors, and let each new year find you a better man." My advice? Listen to good old Ben… See you next year!
Gary Snoman 2007 Movie
December 23, 2007
Blueprint released their latest installment of Gary Snoman. Ethan I were watching and he asked, “is the snoman supposed to be you?” LOL! Check it out here.
Free Idea: Caststone Fireplace Business
December 21, 2007
I am always telling people ideas are worthless ~ execution is priceless. So I am going to start giving away my ideas (good and bad) to see if anyone will ’steal’ them (FYI - please steal my idea ~ oh and if you had it first, I didn’t steal it from you). I thought this one might be good, but I am too busy and I found a potential weakness. I will explain all below:
This summer I began renovation of an older home in the Preston Hollow area of Dallas (pictures here). All three fireplace mantels in the house needed to be updated and I immediately thought that caststone mantels might do the trick. After looking around I decided that the cost, between $3,000 and $6,000 per mantel was a little outside of my budget (especially since I planned to put a 50" plasma over each). More recently my Mom told me she was considering replacing her mantels (my parents are renovating a house as well) with caststone. Her research confirmed the pricing I had previously obtained. Then an idea struck me. How hard could it be to actually make a caststone mantel?
I began to research cast stone and realized it has been used in buildings since 1138. It can be made from white or grey cements, mixed with manufactured or natural sands and crushed stone (or natural gravel or mineral color pigments). According to my favorite source, Wikipedia, most ‘cast stone is a Portland cement-based architectural precast concrete product manufactured using high quality fine and coarse aggregate as its primary constituents. Simulated stone, or look-alike products made with alternative ingredients such as gypsum, lightweight products, glass fiber, calcium silicate, stucco and other materials are less durable and not nearly as well time-tested. The use of a high percentage of fine aggregate creates a very smooth, consistent texture for the building elements being cast, resembling natural cut stone. Other ingredients such as chemical admixtures, pozzolans, and pigments also may be added.’
Without too much trouble I was able to determine that I could make a cast stone mantel for around $500 in material and labor. Wow, the margins in this business are really good. The major costs are a) advertsing/sales b) shipping c) inventory and d) storage. My idea was rather simple. First, we would develop a brand identity i.e. Westminster Stone Works for example. Then we would build a website to drive Google traffic and other advertising traffic to. Then we would have ten negative forms built - i.e. our standard mantel designs. Next, we would contact small concrete contractors in each major market and offer them a turnkey business for a small fee - creating our ‘dealers’. Once someone in LA would order a mantel, we would sell the appropriate form to the dealer as well as our proprietary mix and the contractor would make the mantel and deliver it within a week (about the same time it would take to ship a pre-made mantel from Dallas). The idea is to eliminate all shipping, inventory and storage expensese, or at least push them to the edge and make them the ‘dealers’ problem. Dealers would be allowed to sell our mantels directly (without comission), as long as they didn’t use our brand or advertise (electronic, print, tv).
This sounded like a neat little business, but then my Mom found a small shop that would carve a real marble or stone fireplace for half the cost of the cast stone. What! You are kidding, you can get the REAL thing for half? Turns out they will customize the size, design ~ everything and deliver it in three weeks. WOW. They are made in Mexico. The only issue is that they can only handle a limit number of orders (I bet I could come up with a way to increase their production capabilities). In the meantime, I decided not to pursue the cast stone fireplace business, so you are free to steal it ~ Westminster Stone Works = $0.00.
Europe’s Richest Man: Putin?
December 20, 2007
Turns out Putin has amassed a huge fortune during his term in office. Estimates put his wealth at $40 billion+. The Guardian suggests,
Putin “effectively” controls 37% of the shares of Surgutneftegaz, an oil exploration company and Russia’s third biggest oil producer, worth $20bn, he says. He also owns 4.5% of Gazprom, and “at least 75%” of Gunvor, a mysterious Swiss-based oil trader, founded by Gennady Timchenko, a friend of the president’s, Belkovsky alleges. Asked how much Putin was worth, Belkovsky said: “At least $40bn. Maximum we cannot know. I suspect there are some businesses I know nothing about.” He added: “It may be more. It may be much more.
Looks like the Russian’s have a new aristocracy ~ members of the former KGB. Putin is their first Czar…
Rich People’s Problems ~ Ferrari’s Anti-Competitive Practices
December 20, 2007
Many of the thirty-somethings I know are just now reaching the million dollar mark in their bank accounts and in most cases the money is burning a hole in their pocket. The favorite vehicle for newly minted millionaires? The Ferrari 599 GTB.
There is only one problem. The newly minted millionaire can’t buy one ~ at ANY price. Does this sound un-American? It turns out that you can’t just walk into a Ferrari dealer and drive out with a new car. Instead you have to convince the dealer you are serious.
Step One: You need to buy a used Ferrari from the dealer. If you are lucky you might be able to find a 2006 430 Spider with 2,500 miles for around $290,000.00. Oh, but you must agree not to sell it yourself, but instead to trade it back in when you are allowed to purchase a new 599 in two or three years.
Step Two: Put your name on the wait list and make a sizeable deposit in the five figure range.
Step Three: Show up at the dealer’s office as soon as he calls to let you know that your 599 GTB has arrived. Bring a gift, perhaps a bottle of wine (think expensive and French). Accept whatever he offers you for the 430 Spider you bought two years ago. Pay whatever price he quotes. Drive away as soon as possible.
DO NOT resell your 430 to anyone but the dealer. If the dealer learns (or even worse, Ferrari of North America learns) that you have breached their security and let their prancing pony out of the club your name will be removed from all waitlists FOREVER. That is it, game over, you never can buy a new Ferrari for remainder of your life. Once you get your 599 GTB you must agree to sell it back to the dealer. No exceptions. Otherwise you will receive the Ferrari Death Penalty.
Doesn’t this sound like anti-competitive trade? Price fixing? Something, right? Of course when you pay half a million for a Ferrari you are paying for more than just sheetmetal, you are paying for history. After a long dicussion with my wife, she we decided that it might make sense to get our kids into college before buying so much history.
Connecticut start-up invents DC power?
December 18, 2007
Validus DC Systems needs to pay it’s PR firm a bonus for getting c|net’s Martin LaMonica to believe the company invented DC power. LaMonica suggests that the idea of using DC power in data centers is a NEW idea. She explains that ‘nearly all data centers use the alternating current’. Of course Martin has never actually been in a data center. Traditionally, all data centers used DC power for a number of reasons including the fact that most telecom equipment operates at ~48vDC. It is only a recent occurance (last ten years) that data centers were built to support equipment utilizing 120vAC. Our facility has both a Liebert UPS and a Lorain DC Power plant. Great work Validus!!!
Chatting with the IEEE
December 18, 2007
This afternoon Ron Jennings, CTO of StartTech and I were invited to talk to the Dallas Chapter of the IEEE about entrepreneurship and venture capital. We discussed the opportunities for fund raising in North Texas and the state of startups in general. I must say I enjoyed listening to Ron more than I enjoyed coming up with pearls of wisdom myself. I concluded my thoughts by suggesting that entrepreneurs in North Texas should give up their NDAs and start sharing their ideas with one another. Too few people actually execute on their own ideas to take the time to steal yours. Go ahead and share your idea, it is likely you will find people who will help you execute. Anyway, I got this cool clock…
RIM is moving to DFW!
December 17, 2007
RIM’s decision to move their U.S. headquarters to Irving is great news for Dallas. The company plans to hire 1,000 new employees over the next five years for their R&D, business operations and administration segments. Hat tip to Glenn Hunter, now of Frontburner, for the news!
Founders in Dallas
December 17, 2007
You may have noticed a lack of venture capital activity in Dallas, but there is no dearth of startups. Just a quick look around Dallas and you will find scores of very cool businesses founded by very smart people (very few of which are funded by VCs). Read more
Checklist for Idea Evaluation
December 17, 2007
I get more than a few calls each day from entreprenuers with an idea for the next big web application (the next youtube, the next myspace, the next…). Ev Williams wrote a post titled, "Will it Fly? How to evaluate a new product idea." He suggests a seven point test for your idea (as compiled by Carleen Hawn):
Tractability: How difficult will it be to launch a worthwhile version 1.0?- Obviousness: Is it clear why people should use it?
- Deepness: How much value can you ultimately deliver?
- Wideness: How many people may ultimately use it?
- Discoverability: How will people learn about your product?
- Monetizability: How hard will it be to extract the money?
- Personally Compelling: Do you really want it to exist in the world?
Note to self: ‘we need to spend some time looking at our ideas using this method.’
The Funded = Equity?
December 17, 2007
Earlier this year I pointed out a new site for entrepreneurs looking for venture capital called The Funded. The site generated quite a bit of controversy in the VC community. Venture capital firms love to talk about the size of their funds and the rate of return their investments generate, but post a few comments about how easy or difficult to work with and watch out!
In the late 90’s I visited more than 100 venture capital firms raising money for my startup. I have three notebooks full of notes about what each investor was looking for, what questions they asked, what they said they wanted and what I suspected they wanted. Today, entrepreneurs can save a lot of time by simply creating an account on The Funded to get a fairly accurate picture of more than 2,800 venture capital firms. I checked out the reviews on the firms I spent time with and the reviews were generally dead on. Of course, there are a few sour grapes posts, but sour grapes are often the only thing you get when you talk to the wrong VC.
My advice? Check out The Funded prior to each meeting. Take notes and after some time has passed, post your thoughts to the site (either publicly or anonymously).
Conservative Entrepreneurs Suck?
December 9, 2007
According to Saar Gur the ‘old guard’ i.e. guys who started companies and raised venture capital in the late nineties (like me) are not being bold enough in their business decisions and it’s hurting their startups. More and more venture capitalists seem to be agreeing with his thesis, suggesting that ‘entrepreneurs from the first bubble are overly cautious, and are hurting their businesses.’ Mike Arrington wrote about his conversation with Saar in a post titled, “The Twice Shy Entrepreneur.” Of course, my first thought is that the critique is a little self-serving.
Mike explains that the ‘New Guard’ don’t carry the burden many of us faced when we had to call angry investors, laid off employees, appeared in bankruptcy court and were trashed in FuckedCompany ~ instead he suggests ‘they’re optimists, as any entrepreneur should be, they have no baggage.’ He is right. But is that the only reason the old guard is being more conservative? Maybe we are older, wiser, wealthier and have more kids?
Of course, most venture capitalists have eight to ten startups at any one time and at the end of the day they only need one to work. The job of a VC is convince entrepreneurs to swing for the fences everytime they get to bat. The job of an entrepreneur is to figure out when a single or double will work better. Saar is 100% right ~ the ‘old guard’ are more likely to be starting their businesses without the help of venture capitalists. Most of us are more likely to be able to bootstrap our ideas as opposed to the ‘new guard’ who don’t have that luxury. If I was in the VC game I would spend more time talking to the ‘new guard’ versus the ‘old guard’ primarily because they are more likely to want and need my money. The ‘old guard’ are less likely to want or need early stage money ~ the most expensive capital (i.e. the best deal for a VC).
My advice? If you are a new guard entrepenuer just keep doing what you are doing. If you are an old guard entrepenuer don’t buy into Saar’s thesis ~ you have a better understanding of your business and are in the best position to decide when it is time to ’swing for the fences’. Stick to your guns. Raise money when you need it, don’t raise money because you get called a sissy by a few VCs. Ironically, Saar’s claim to fame was a company he started called Adteractive. He build that company to $120MM in revenue without any outside capital. Wonder if he was a little too cautious? Or maybe just very smart…
Open Source Service Marketplace!
December 6, 2007
Sourceforge.net is offering a marketplace designed to facilite the sale and purchase of support services. Modeled on ebay’s marketplace it competes with Red Hat’s Exchange launched earlier this year according to PC World. Currently there are more than 800 listings on the site, but expect many more soon with a user base of more than 1.7MM people.
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