New Years Resolutions

One thing I have always enjoyed is setting goals.  These work for companies as well as people.   New Years is a perfect time to do this.

When I was running my company, we would always set 4-5 goals or resolutions.  We would publicize them throughout the company.  We would break them down into smaller goals.  And we would report on our progress weekly.

Now, I am encouraging all of our investee companies to do this.  An example might be American Health Journal (American Health Journal is a site with a video library of Doctor interviews on everything from Psoriasis to Asthma to Depression etc.) goals:

1 – Have first page Google for 500 videos by June 1.

2 – Have 5,000 videos posted by April 1

3 – Sign one partnership by February first with a leader in internet health.

4 – Post 3 articles per day to go with the videos

etc.

We try to go with SMART goals.  Specific, Measurable, Attainable, Realistic and Timed.   Weekly reporting keeps them front and center.  Breaking them down allows each part of the company to contribute.  And breaking them down makes them seem less daunting.   And from this comes action plans which help really get things done.

We tend to overestimate what we can accomplish in a day and underestimate what we can accomplish in a year.  Having goals can keep us on track to achieving what we want to.

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Sales and Venture Backed Companies

Sales are the lifeblood of any company. Canrock invests in many early-stage ventures. When we find one of our investments is struggling in most cases this has to do with sales. Sales are closely tied to financial statements. Sales success usually means financial success. For this reason we encourage our investee companies to have a sales focus. We also use our extensive network to try to help them sell.

I read a great book by Stephan Schiffman called “Make the Sale Happen Before Lunch 50 cut to the chase Strategies for Getting the Business Results you Want“.

As the title suggests, Schiffman has what he calls 50 rules. I agree with almost all of them but some of them I feel more passionate about.

Rule number 35 is spent at least 75% of your time gathering information. One of the things I’ve learned in both sales and negotiation is that the person with the information has the advantage. The Internet makes information gathering extremely easy. There’s no reason not to lose on this one.

Rule number 24 is make calls for an hour a day. One thing I have often seen in developing company says they simply don’t spend enough time making sales calls. Without spending the time clearly the sales will never happen. And although he suggest making calls for an hour a day, I think double or triple or quadruple makes more sense.

I was interested to see rule 30 was to live off peak this is one of the rules I’ve often used in my time management seminars and that I tout extensively in my time management book.  Like some of his other rules, sales are tied to good time management.

One thing I like about the book is that each one of the 50 rules basically stands on their own. This means the book can be read gradually over a long period of time and the benefits will still be derived. The book is concise and easy to read and I would recommend to anybody who wants to increase their sales.

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Long Island Kicks Off Eco Dev Council Presentations

The Long Island Regional Economic Development Council got the ball rolling today for the state review committee, being the first council to present its strategic plan with the hopes of getting funding.

Council co-chairs Kevin Law and Stuart Rabinowitz were in Albany today showing off the fruits of their three months of labor – Long Island’s five-year strategic plan for economic growth. Law and Rabinowitz recapped the 80-plus page plan, complete with a detailed explanation of the handful of transformative projects the council had selected to be the frontrunners in the quest for state funding.

While only the council’s co-chairs were slated to take part in the presentation, Brookhaven National Laboratory Director Sam Aronson and Canrock Ventures Managing Partner Mark Fasciano also provided commentary on some of the transformative projects the Long Island council was submitting as part of its strategic plan.

Fasciano spent a good deal of time discussing the plan to transform the Hicksville Long Island Rail Road station into a high-tech startup hub, complete with residential, commercial and industrial components.

The council noted that Long Island’s plethora of governments could be a hindrance for getting projects like the one in Hicksville off the ground, although council members stated they were sure the governments would come together to prevent any roadblocks from appearing.

While Gov. Andrew Cuomo sat in on the presentation, he noted he would not be a part of the selection process, leaving that up to the assembled team of Dall Forsythe, a senior fellow at New York University’s Wagner School of Public Service; Syracuse University Professor of Public Administration Walter Broadnax; Brookings Metropolitan Policy Program Founding Director Bruce Katz; and New York State Department of Transportation Commissioner Joan McDonald. In addition, New York State Secretary of State Cesar Perales is serving as a technical adviser to the review committee.

The Finger Lakes regional council presented its strategic plan immediately following Long Island. The other eight regional councils will present Tuesday and Wednesday.

The four top ranked regional plans will receive $40 million for their respective regions. That money will comprise $25 million in cash and $15 million in Excelsior tax benefits for existing companies to expand their businesses. The remaining six regions will split the remaining $40 million, with each one taking home roughly $6.6 million.

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Why Companies Should Not do a B or C Round with a VC

Entrepreneurs and VCs talk as if a B and even C round is a given.  I believe many companies would be better off without them.  B rounds cause more dilution for all shareholders.  B rounds take management time and focus.

So why are B rounds so popular?  VCs and angels like them because they often re-value their portfolio based on the latest round so an up round can make their portfolio returns look good.  But these are only paper gains.  At Canrock we are not concerned with paper gains because we are the source of most of our cash (with a few freinds) – so not a “traditional” venture fund who is simply playing with other peoples’ money.   At Canrock, our goal is real returns long term.

VCs and entrepreneurs like them because they can make the company more stable.  More cash means more runway and therefore more comfort.   They also reduce risk or share it.

So what should companies do if they should not do a B round?  Very simple – they should make money.  There is no shame in making a profit. One of my claims to fame with my technology distribution company was we had 99 consecutive quarters of profit.   And even after SYNNEX bought my company, they would not have been happy if we were not continually profitable.

Most of my favorite investments were companies that made a profit.  Building a company to sell without having a plan to make profit is a very dangerous plan.  It is the plan that will cause a company to continually have to raise cash (and not always with up rounds).

Companies should mature to the point where R and D, marketing, new markets initiatives are simply a % of their profit.

A B or C round can simply be a patch or laziness for a business that should be profitable.  Taking the time and energy of cash raising and focusing it on sales and running a profitable business is a good business decision.

So when is it acceptable to do a B round?

1 – If the company is truly an R and D company developing the next rocket science.

2 – If the company needs working capital (and I never cease to be surprised at how some entrepreneurs think working capital is to pay for losses.  Working Capital is to fund inventory and receivables.  The longer the cash conversion cycle is, the greater the need for working capital.  Losses should be funded with equity – or perhaps that defeats the purpose of this article which is to argue that companies should not have losses.)

3 – In the rare case that the company has found the replicable formula to create profits then sometimes it makes sense to accelerate it with a B round.

Jim Estill

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Why VCs do not sign NDAs

There have been a variety of discussion and articles written on why VCs do not sign NDAs.

Canrock is no different.  Our logic is:

1 – Ideas are a dime a dozen, it is the implementation that is difficult.

2 – We see too many ideas and often there is some overlap.  Often the ideas are seen by different people in the fund.  Even tracking who has seen what is difficult.

3 – We invest in only a small percentage of the opportunities we see.  Our investment criterion includes way more than just the idea.  It includes the team, the probability of success, the terms, synergies with our other companies and the value we can add etc.  It is possible we like the idea and will invest in a similar company with a different value proposition.

4 – We already have over 100 investments (including those made by the partners).  Many are bound to have some overlap.

5 – Legal documents cost money and take time (and for people like me are a pain).   Any legal document needs to go to our lawyers and this only complicates things.

So will we steal your idea or give it to someone else?  No.

How to you protect yourself:

1 – Check out the VCs reputation.  Do not deal with any that you think might be stealing ideas (and I can assure you it would be very few).  Do not even approach people you do not trust.  And asking people to sign an NDA is a trust issue.

2 – Implement well. VCs want to invest in people and the team.

3 – Develop the idea.  A head start is worth a lot in the technology space (and Canrock only does Tech deals)

4 – Protect trade secrets.  Usually the VC does not need to know the tiniest of details on how you do things.  VCs need a conceptual sales.  We like companies to have good process around IP.  This means having trade secret procedures and patents.

Jim Estill

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