John McArthur’s New Venture Blog

For the 3rd time this month, Mark Leslie was mentioned in a conversation or presentation. The most recent was at TiE Boston’s Annual VC Outlook Dinner. Actually, mentioned, is way too soft. He was cited, praised, quoted, and otherwise venerated. Mark has a remarkable story. He took VERITAS from 12 employees and $95,000 in annual revenue to over 6,000 employees and $1.5B in revenue, before the company merged with Symantec on July 5, 2005.

I first met Mark, when I hosted IDC’s StorageVision conference in San Jose in May 2000, a year in which we recruited Steve Luczo, then CEO, and now Chairman of Seagate, and Joe Tucci, then the newly appointed President and COO  of EMC.  Mark wasn’t the best dressed (that was Joe) or most poised (that was Steve), but he gave, by far, the best talk. The talk that was discussed three times this month wasn’t, however, his StorageVision speech. That honor goes to this talk: “It Always Takes Longer and Costs More.” On Page 15 of the presentation, Mark begins a discussion of the Sales Learn Curve (SLC), which is the sales equivalent of the Manufacturing Learning Curve (MLC). The SLC is critical, Mark argues, to knowing when to step on the gas with sales.

Almost every company I’ve talked to measures the cost of sales. But where organizations differ is in the costs that are included in the cost of sales. Mark includes:

• Marketing
• Product management
• Product marketing
• Product  support
• Sales engineering
• Sales

Some of these costs are more fixed than variable. Marketing, product management and product marketing don’t need to grow linearly with sales. Support, sales engineering, and sales costs are, however, more directly proportional to revenue.

Since more sales means that the fixed costs in the cost of sales calculation decline as a percent of sales, many startups are tempted to hit the gas early on deploying sales and sales engineering resources. But until they have gone through the iterative process of perfecting the sales process, this approach just burns cash.  Instead, he stresses the importance of  investing for learning in the early stages, making iterative improvements in the sales process. When the sales process is perfected, then, and only then, should a company put the “Pedal to the Metal,” making significant investments in sales and sales engineering.

I met a few weeks ago with a friend who is the CEO of a startup company based in the Boston area. He’s not a first time CEO, and he’s had at least one successful exit, selling his company to a major system company. How good was the exit? Lets just say that he didn’t have trouble raising money, when he was ready to do his next venture. When he did his last round, it was significant and at a very nice valuation, by IT infrastructure standards.

I think data is important, and I like to know what corporate executives care about, so, now, every time I meet with a startup company, I ask the CEO what they measure. Typically on the finance side, I’ll get answers like revenue, cash flow, burn rate. On the sales side, they tell me they track new customers, number of deals, repeat sales or renewals, and average deal size.  And on the development side, they will track the total number of bugs, sometimes by criticality, and the bug retirement rate. These are all good things to measure, so, if you are measuring these things, good for you.  And if you’re not measuring them, time to break out a yardstick and some monitoring tools.

My very successful friend gave me one more number to track before all others. Given his track record, I paid attention. The most important number for him is the percentage of customers that say they would recommend the  solution to a colleague. He actually has someone call every single customer and ask only one question:

Would you recommend our solution to a colleague?

This is not the same question as “Would you be a press reference or allow us to do a case study on your installation?” That brings with it the usual baggage of legal and PR approval processes. No, for an early stage company, this question, “Would you recommend our solution to a colleague?” encapsulates the only truly important metric into it. It answers the question, “Am I building the right product?”

A meeting this week with Amy O’Connor, Senior Director of Analytics at Nokia and author of the Im AmyO blog, has led me down an interesting path at the end of the year. Normally, I might spend the last day of the year in self-reflection: Am I happy with how I spent the past year? Do I feel good about the results? What will I resolve to do differently next year? This year, however, instead of self-reflection, I’ve decided to end the year in a little self analysis. What’s the difference between reflection and analysis? Data.

To help me with that, I’m re-reading “Competing on Analytics: The New Science of Winning,” written by Thomas Davenport and Jeanne Harris and published by Harvard Business School Press back in 2007. The first thing that became abundantly clear was that I didn’t have enough data on myself, my activities, and the results of those activities.  So, I decided to collect some. As a starting point, I decided to analyze my activity publishing content on Wikibon.

I posted my first article, “StorMagic Announces SvSAN and Offers Free Download,” on Wikibon on February 19, 2009. It’s the only article I published that year, and it was an experiment. It was also, admittedly, a little self serving, since I’m a non-investor director on the board of StorMagic. Upon analysis, the results of the posting were pretty good. It’s been viewed over 3000 times and received a community rating of 4 out of a possible 5. Perhaps it was ranked a little lower, because the article was a little self serving, though defensibly 100% accurate. Given the results, you’d think I might have published more, but I didn’t.

In 2010, I posted 18 articles on Wikibon, and I posted another 6 in 2011, despite an amazing amount of disruptions, which I won’t go into here. So over the almost three years, I’ve posted a total of 25 documents. The total views across all of my documents is almost 48,000, the average number of views is a respectable 1900+ and the average community rating is 4.8+, despite my lower starting point. I guess I’ve improved with age.

The documents were all relatively short (at an average of 525 words, a very quick read) and designed to be actionable. Personally, I think articles are best, when they spark a dialogue or provoke a comment, and I’m sorry to say that the average number of comments per post was just over .7 and more than half had no comments.  That’s something  that’s worth figuring out how to improve.

Reporting on minimums, maximums, totals, and central-tendency are interesting first steps. But they are just that: Reporting. The key now is to get to the next level, and evaluate the impact of article length, keywords, topics and themes on views.  If anyone can suggest an open-source text-analytics tool, I would be very grateful.

Over the next year, I have resolved to write more, measure more, and analyze more. Expect to see more articles published by me on Wikibon, because I like the team, and it’s an easy platform to use. I enjoy the exposure to end-users that Wikibon affords me, and I like the fact that when I publish content there, I know how much it’s being read. I also enjoy the opportunity to have an occasional conversation with an IT industry executive, with whom I have no current business relationship. I’m a curious and rather social guy, so it doesn’t have to all be about my business and potential business opportunities.

I also plan to learn more about the rapidly developing field of data analytics, currently promoted under the term “Big Data,” which is either a subset or super-set of analytics, depending on your point of view.  I’ve always enjoyed mathematics and analysis, but back when I was a math major (along with majors in Physics, Education, and Psychology), about the only opportunity for a B.S. graduate in Mathematics, outside of academia or education, was to become an actuary at an insurance company. Frankly, I didn’t want to spend my life figuring out morbidity rates. But the life of a data scientist, especially when that skill can be applied to making better products and creating more jobs, is significantly more interesting.

Finally, Amy O’Connor tells me that Nokia plans to re-invigorate a local Big Data user group that has been meeting at the Microsoft offices in Waltham. So you can expect to find me there. I’ll post details as soon as I get them. I hope to see you there.

Best wishes for a happy and healthy new year.

Last summer I spent an enormous amount of money when I purchased the Torque game engine, so that my oldest son could try his hand at game development. In order to maximize my son’s success and seeing that there were many in-depth books available to learn how to use Torque, I offered to buy him a book as well.  But my son assured me that it was unnecessary, since he already knew how to program in Torque. That seemed odd to me, given that he had never had the software before, but turns out, he learned how to program in Torque by reading websites and watching videos on line. Increasingly, that’s how the latest generation learns. And thanks to a growing library of videos stored at sites such as YouTube, and contributors such as Khan Academy, you can learn how to do almost anything, including most of the math you will need to graduate high school and pass the first year of college.

Videos are also becoming an important medium for companies to get the word out, to explain, and clarify. So as an example, after a 2-day planning meeting with one of my clients, StorMagic, where I serve as a member of the board, I asked my son to record five short videos of StorMagic’s CEO, Hans O’Sullivan, answering simple, direct questions. Each video is less than a minute long and answers one or two questions on topics such as the background of the management team, the strategic focus of the company, the impact of recent announcements, and the company’s relationship with one of its partners.

Videos seem to be all the rage.  I don’t know what will come after videos, but it seems to me that for the next few years, at least, video will be of strategic importance in getting the word out about your company.

Hope you enjoy these.

StorMagic’s CEO Discusses Multi-Site Installations of SvSAN for VMware

StorMagic CEO Discusses the StorMagic Team and Recent Growth

More videos regarding StorMagic can be found on YouTube by searching StorMagic. You can even learn how to install and manage an SvSAN just by watching a video.

From time to time as a favor to friends, I will contribute as guest blogger.  So let me direct your attention to this Guest Blog on Countdown.2.Storage Expo.  Rose Ross, who also attended the BDEvent, asked me to provide a write up on the one session that she missed, which was the one that I co-chaired with Mike Miracle.  For reference and completeness, here’s Rose’s very-excellent post on the rest of the event.

Rose has been a friend for many years, so, of course, I said, yes.  For those of you who don’t know her, Rose is an accomplished PR professional, who carries many titles, including:

• Chief Marketing Officer at Launchpad Europe
• Managing Director / Founder at Omarketing

It seems I’m not the only one who is a Rose fan.  I see on her bio that she is the 2005 winner of the Toigo Award for Best Storage PR Professional.  For those that are looking for PR support in Europe, take a look at Omarketing, and for those looking to expand a European channel, take a look at Launchpad Europe.

And under the  FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, which focus on “Testimonial Advertisements, Bloggers, and Celebrity Endorsements,” let me assure you that I am not paid by, nor do I receive commissions or referral fees from Launchpad Europe or Omarketing.

Oh, yes, the next BDEvent will be held at the Sheraton in Palo Alto, CA, on January 25 – 27, 2011.

Many startups are using free, online survey tools. Today I helped StorageVirtualAppliance develop a survey targeted at users of VMware and other virtual-server solutions. The survey was developed using FreeOnlineSurveys, similar to Survey Monkey, with which I was more familiar.

As I was working with StorageVirtualAppliance, I was reminded of some rules in survey design.

1) Know the purpose of the survey: Lead Generation, Evangelization and Market Awareness, Actionable Information for Product Marketing, Actionable Information for Product Management

2) Think about how you will categorize and summarize the data. Open-ended questions may provide great color commentary or quotable statements, but in large volume are difficult to categorize and summarize.

3) Have an incentive for those that take the time to complete the survey. The incentive could be as simple and inexpensive as a summary of the results, it could be an opportunity to be entered into a prize drawing, or it could be a small cash award.

In addition to helping with the survey, I also offered to help get the survey out to a broader set of participants. So, if you know any IT professionals, please send them to this blog and have them click on this survey link.

Thanks in advance. Participants could win a copy of Eco-Tech Warrior, Greg Schultz’, new book, The Green and Virtual Data Center.

One of the sessions I attended at the New England Area VMware User Group meeting in Newport, Rhode Island last week included a discussion on how to take the internal storage of a VMware ESX host and turn it into a virtualized iSCSI storage appliance.  I happen to believe that the approach has great merit for many smaller IT shops and for remote office environments.  The internal storage of an ESX server, if totally useable and accessible to the ESX host and other ESX servers on the network, is probably the cheapest storage you will ever buy.  What I found particularly interesting about this session, however, was the fact that the presenter downplayed the approach as good enough to experiment with the storage virtualization software, but not good enough to run production applications.  In order to encourage companies to try the software, the developer offers a free 30-day trial, the expiration of which then renders the server unuseable, unless you purchase a permanent license.  While I believe the company has good software, I don’t understand the approach to the market. (more…)

I attended the New England Area VMware User Group meeting in Newport, Rhode Island last week.  It was a great opportunity to see what challenges IT managers are facing, what solutions they are adopting, and what problems remain to be solved.  It was also a good opportunity for me to revisit what I learned many years ago in studying the research of  Clayton Christensen and his concept of Disruptive Innovation.  Two of my clients have what I consider disruptive technologies.  I’ll write about Tek-Tools in this post, and then cover  StorMagic in a subsequent post. 

Tek-Tools offers the Profiler Suite of monitoring, reporting, and forecasting tools for servers, storage, applications, files, and, yes, VMware.  Why is it disruptive? Tek-Tools’ Profiler is easy to install, easy to afford, and easy to use, and it’s “good enough” for the bulk of today’s customers.  It does not overshoot current market requirements.  It gives quick answers to important questions like: How much storage do I have installed? How fast is it growing?  How much is allocated? How much is used? When will I need more storage? Where is my performance bottleneck? How old is my data? Who is violating data retention policies? Which virtual machines are using which storage? Which virtual machines are no longer in use? Which physical machines could I consolidate onto a  VMware ESX host, without encountering performance issues? Where is my orphaned storage? (That’s a technical term that means I deleted the virtual machine, but forgot to return the allocated storage to the storage pool.)  

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One of the things we used to discuss, when I was running the storage research practice at IDC, was “When will a market disappear and just become a feature of some larger market?”  Examples are numerous.  Remember when there was a market for browser software? And, while NetApp is going strong, both Microsoft and Sun Microsystems are trying to make NAS a feature of the operating system.

One of the reasons I joined the board of StorMagic was that I saw the potential for the company to be a market disruptor.  Today, StorMagic announced SvSAN software, which, when installed on a VMware ESX server, converts the internal storage of the ESX server into an iSCSI SAN.  VMware leverages the fact that most single applications don’t need all the computing power of today’s servers.  SvSAN leverages that same fact to provide the storage management function within the ESX server, and also takes advantage of the fact that the internal storage capacity of an ESX server, perhaps the least expensive storage you will ever purchase, is more than enough capacity for a large number of VMware ESX server-hosted applications.  (more…)

It’s a tired truism that a rising tide raises all ships.  And a rising market rewards both the creative and the rote practitioners.  In years past, it didn’t take a financial wizard to take out an HP12C, calculate a lease-rate factor, bundle up a package of leases and sell them to GE, BankofAmerica, or Key Bank.  Selling off leases enabled the equipment or software provider to recognize a sale, while still allowing customers to spread payments over the useful life of the acquired asset. 

Times have changed, and just when everyone should have a lease offering and most thoughtful customers want one, so they can preserve cash on their balance sheet, the big guys that traditionally bought up the bulk of leases have gone packing. So where do you sell off your lease paper now?

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