Dasheroo, a business dashboard, is closing down: “‘Dasheroo was our third startup,’ Hingley said. ‘In the prior two, we went the friends and family route, raising small sums, as well as spending our own money. In all, we raised just over $1 million and focused on getting cash flow positive as quickly as possible.’ In the case of Dasheroo, a colleague who was starting out as a VC approached the couple with an offer to provide early-stage funding. They accepted. ‘We decided to swing for the fences,’ Hingley said. ‘We received a $3 million A round, which was more than the total amount we had raised in either of the two previous startups.’ The VC told the couple not to focus on generating revenue but, rather, on building a strong team and product.
Here’s how Walmart intends to transform grocery shopping: “On a sweaty September morning in the Nashville suburbs, Anna Brummel pulls her white SUV into a Walmart parking lot to stock up on groceries. But she never sets foot in the store. The mother of three had tapped out her order on her smartphone earlier while lying in bed. And now, she parks in a designated spot during a time slot she selected, and Walmart workers load up her car with the goods they picked and packed for her. Walmart is America’s largest grocer, and its aggressive expansion of pickup services has turned its parking lots into a laboratory for the future of online grocery shopping — one of the trickiest puzzles in all of retail.”
Surviving mom-and-pop bookstores are trying to use social media to build a customer base: “These social media experiments are shifts in culture for many small businesses. ‘The one thing small business has over big boxes is that they can get to know every customer, but they have been hesitant to engage online,’ said Peter Shankman, a social media strategist and the author of ‘Zombie Loyalists: Using Great Service to Create Rabid Fans.’ ‘They heard about needing followers but didn’t see any returns. When they realized that by making it personal, they could get return shoppers, it changed.’”
A look inside one family’s business transition: “The fact that her parents were still young enough to get involved with other projects if they chose to do so was also vital to the transition – instead of concerning themselves with her business, they could focus their efforts elsewhere, on a new enterprise. Eventually, her father did exactly that. He took ownership of the iconic Milwaukee diner chain George Webb Restaurants in 2010. ‘I think true entrepreneurs, they can’t stop,’ Hansen said of her father.”
If you run a business, you need to be on Glassdoor: “Not long ago a former employee wrote a scathing review of my company on Glassdoor. The review said our management team is inexperienced, our raises are marginal, and our performance-based pay structure is unclear and not mathematical. … My first instinct was to dismiss the review as sour grapes. I suspected that the person who wrote it was an individual I’d fired for a performance-based reason.”
Will drivers leave Uber for Juno to get a piece of the action? “The drivers learned that Juno’s commission was ten per cent, ‘guaranteed for our first twenty-four months.’ (Uber typically charges twenty-five per cent or more.) On a slide titled “Example Fare,” a bar chart showed a comparison between an Uber driver and a Juno driver on a thirty-dollar ride: the Uber driver, after commission and taxes and fees, would keep $19.11, while the Juno driver would get $23.61. ‘For literally the same amount of work, you’re taking home four dollars more,’ Smith said. ‘And that’s on one ride. Think about it on ten, over twenty.’ Juno was also offering twenty-four-hour support for its drivers, with a promise that you could always reach a real person on the phone, ‘not a robot.’ Finally, Juno drivers could earn an ownership stake in the company, in the form of restricted stock units. ‘I think this is a huge deal,” Smith said. “And it’s totally unique.’”
MailChimp’s founders built the company without venture capital, a Bay Area presence or a crazy burn rate: “Under the radar, slowly and steadily, and without ever taking a dime in outside funding or spending more than it earned, MailChimp has been building a behemoth. According to Ben Chestnut, MailChimp’s co-founder and chief executive, the company recorded $280 million in revenue in 2015 and is on track to top $400 million in 2016. MailChimp has always been profitable, Mr. Chestnut said, though he declined to divulge exact margins. The company — which has repeatedly turned down overtures from venture capitalists and is wholly owned by Mr. Chestnut and his co-founder, Dan Kurzius — now employs about 550 people, and by next year it will be close to 700.”
Benefiting from Canada’s smoother immigration process, Vancouver may be building the next big tech corridor with Seattle: “One serious obstacle to Vancouver’s tech ambitions is its head-spinning housing costs. The median price for a detached home in the metropolitan area in August was 1.4 million Canadian dollars (about $1.06 million), a 27.8 percent increase from a year earlier, according to the Real Estate Board of Greater Vancouver. In the San Francisco metropolitan area, the median single family home price was about $848,000, according to Zillow. But while median pay for tech-related jobs is $112,000 a year in the San Francisco Bay Area, it is just under $49,000 in Vancouver, according to an analysis by PayScale, a compensation data firm.”
Are you building your company for yourself or for your VCs? “There are two types of companies in America. First, there are those that are designed and structured from the very beginning to be sold and sold quickly. Let’s call them the meteors. Second, there are the “real” companies. These companies represent the vast majority of successful businesses in the U.S., and typically take years to grow into profitable, sustainable enterprises. It is a great irony of entrepreneurship that VCs are rarely, if ever, interested in real companies – those that require time, blood, sweat and tears to grow.”
Selling the Business
Never take an earn out. But if you have to, here’s how to negotiate one: “Mac Lackey, a veteran entrepreneur who started Kyck.com, used one novel approach to structuring his earn-out. Kyck.com is a soccer application that parents and coaches can use to manage recreational leagues. Kyck.com had attracted thousands of users when they were approached by Sport Ngin. As Lackey told me when I interviewed him for Built to Sell Radio, Lackey received an offer of about 20% cash on closing and 80% of his expected proceeds to be paid based on future performance. With such a large portion of his sale proceeds ‘at risk,’ Lackey was keen to ensure his earn-out was achievable. Rather than tie the earn-out to Kyck.com’s profit as a division of Sport Ngin, they decided to take a snapshot of all of Kyck.com’s customers the day that Lackey sold the business, then agreed that Kyck.com shareholders would benefit financially from the growth of any of those accounts over time.
A guide to selling a business to its employees: “‘It’s amazing to see how much more interested and engaged team members can be in an ESOP that really leverages an ownership culture,’ says Fredericks. ‘Building an ownership culture is not easy even in an ESOP; it requires a management team willing to let go of top down thinking, which is sometimes still very prevalent in older businesses and industries.’”