Filed under: General
So I’ve had about 2 hours sleep this night in between driving to and from work twice to deal with customer problems – Another day of caffine to keep me going it seems 
Well a fair bit has gone on since my last update and we’re now getting closer to that magical critical mass. I expect we’ll reach the point in October sometime depending on how quickly I can get our pipeline business converted into sales.
We’re also facing some very large power cost increases on the back of the wholesale price increases over the last 12 months, mainly due to oil, which means some rapid re-thinking of our cost structure to take into account of this increase.
I’ve also learnt, once again, to listen to my insincts as I had a feeling things were going to go this way and I should have signed a 3-5 year contact last October instead of 12 months!
In other news my friend has started his own blog at http://t3-house.blogspot.com/ completely different to this blog but worth a read also http://www.miniclip.com/games/final-ninja/en/ is a game which has been destroying any free time I have!
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A very good blog on first round investment and board seats is available on the blog of The Burning Door (http://www.burningdoor.com/askthewizard/2007/11/early_stage_board_of_directors.html)
Early Stage Board of Directors
I’ve had a few questions recently from folks who have received first round financing term sheets in which the proposed board makeup seems over the top, from my perspective. Here is a composite (sorry, “mashup”) of the kind of first round term sheet language for Board participation I recently heard from different founders:
One CEO seat (currently founder X), two Series A investor seats, and and independent nominated by the Series A and approved by the board.
This is silly. A more cynical wizard (who would look like me but say “hmm” a lot more) might interpret this as early investors trying to take control of the company immediately. Can you spot the three things we don’t like about this proposed board structure?
First, “one CEO seat (currently founder X)”. That’s nice, founder X gets a board seat. How long does founder X have a board seat? Only as long as (s)he is the CEO. New CEO, new board member and out with founder X. No more founder board seats. Let’s move on to the other troubles before we re-draft the entire proposal.
Problemo numero dos, “Two Series A seats”. Um, I don’t get why the first round investors should get two seats. If the Series A is all being done by one institution, then this is particularly annoying, but even in the case of a syndicate, the series A investors should have a single representative on the board. “But but but”, you say. “Wait wait wait”, you say. “What if you really appreciate the input of two particular members of a syndicated financing?” Excellent point; the proposed board structure might include a board seat for the lead investor on the round, and board observation rights for one or more members of the syndicate.
Finally, and particularly the way this proposed board is structured, watch out for the wording on “an independent seat nominated by the Series A and approved by the board.” In this case, the Series A investor obviously controls the independent seat completely. This entrepreneur’s post-A round board, if accepted, is going to have 3 people representing the Series A and one CEO, who may or may not be the founder six months from now. This is, in legal parlance, “sucky”. If this is one investor doing the round, note that we might also raise our eyebrows and wonder why the institution’s partners have so much free time that two of them can take board seats in the same company.
Here’s a more straightforward Series A board structure: “One founder seat, one Series A seat, and an independent nominated by the founder and approved by unanimous consent of the board”. If you’re a multi-founder company, then I might change this to: “One founder seat (founder X), one CEO seat (currently held by founder Y), one Series A seat, and one independent nominated by the CEO and approved by unanimous consent of the board”. Frankly, you could keep it even more basic in the latter multi-founder case and just go with founder/founder & ceo/series A, but I personally enjoyed having an independent board member once we’d added one ourselves, and I think it’s helpful to get this person in sooner rather than later.
In the multi-founder case, when you do a 2nd round financing and you can keep the same general structure, you still have a nicely balanced board: something like two people from founder/management, two investors, and an independent. From here you can do things like layer in more independents as you grow, etc.
Rational investors are comfortable with these sorts of structures, and in fact, in our series B negotiation at FeedBurner, it was the investors who countered with “founder seat and ceo seat currently held by founder” when we originally redlined the first term sheet with two founder seats. This is a perfectly reasonable compromise in most cases and provides the investors with some security that a “renegade founder group” can’t hold management and investors hostage, while giving a strong founder group some assurance they will have significant and balanced participation in the board. There is no reason a founder should feel obligated to cede control of the company to a single investor on an early financing.
Filed under: General
I used to approach sales with a very softly, softly approach letting the customer be in the driving seat and reacting to the questions/communications they gave to me.
Since getting the investment last year and the explosive growth I’ve seen things have changed dramatically and I’ve had to “grow-up” in a lot of the ways I deal with the company and business in general.
One of the main things has been how I run sales. Previously it was very ad-hoc with no real marketing just letting things come to us and then not keeping a proper track of leads, opportunities and results, we had a full CRM just never used it properly, however now I see that I should have spent that extra day just learning how to use it then really buckle down with marketing our services. If I’d done that 3 years ago I could be in a very different position now.
What I’ve learnt from a sales point of view, for IT/Technology at least, is the following:
- You have to really shove all your offerings in people’s faces. That might be Google Adwords everywhere, emails to all the people you know and potential clients (If you send 500 you’ll get hopefully 8-10% response rate with good leads) or going to events with your target customers and just talk shop to them to find their requirements.
- A good CRM package is a must. Once you get more than 5 or 6 leads on the go with emails/calls back and forth it becomes almost impossible to keep track of everything for when they call you out of the blue wanting to know pricing. I used to use a book but its just not practical. Spend that £30 a month on something like Salesforce it’ll pay for itself within days!
- Set yourself weekly targets for sales. I used to get sell and if I happen to sell something then that’s good but now I set myself a target per week. These help to focus and concentrate your efforts where they matter that week.
Well that’ll do for now – I’m thinking about a post around electricity and “Green” issues!
Filed under: General
Well I’ve had a blog elsewhere for a while now but thought I’d start one documenting my life an entrepreneur in the hosting/Internet space.
I’ve been running my company for around 8 years now, 5 and a half years full time, I left school when I was 17 so that I could put all my time into the company.
Since then we’ve had a few ups and downs but the brief story is that I took on some investment about 16 months ago which resulted in finance to be able to aquire our own datacentre in South West London, refurbish it and then “go-live” in October. All our existing equipment was moved down and allowed to “bed in”. In December we started move customers in and since then we’ve been getting busier each day.
This blog is to basically provide a regular insight into the life of someone running a fast-growing company as well as day to day musings on the world.
