"If you are lucky your high-growth software company will one day miss its revenue projections by a long shot." After you have read this statement.......you will likely conclude that the author is crazy...and you might be right...BUT...I have seen supporting evidence for this sentiment many times over....let me explain.
After a period of sustained revenue growth...all the investors are smiling..." we are going to be rich again" they say. Near the end of the fiscal year...we clamour for next year's financial forecast....how much bigger is this thing going to be and how much richer might I become? The forecast is then produced...it is presented to the board and is spectacular...it makes perfect sense...in fact it even looks conservative. At this point, we are very smart.
The something unexpected happens. The first quarter comes in a little under budget and the second quarter comes in way under budget. Deals seems to get delayed and smaller...prospects are asking a lot more questions...and getting calls returned by them seems to take forever. The prospects then let you know that they are looking at several alternatives and are trying to figure out if yours is right for them. This all sounds so new for a company that seemed to have such clear sailing for the past two years.
Investors become concerned. A mild panic surfaces in the Board meetings..."What is going on here?" However...what looks like trouble is really a clue that investors are entering the playing field they dream of.
What has happened is, in a word, "competition.." Once the market becomes confused it is generally a sign that competition is increasing and thus that others see market potential for a technical solution. It means that this subject is becoming important to a large number of people. The good news is that if you have been in the market for a couple of years before this heating process occurs...then you likely have a great leg up on this competition from a competency perspective and your job then is to show the customer why his needs will eventually require the maturity of your solution. You just have to have enough antacid medication to endure the revenue speed bump for which you didn't predict the timing.
If the revenue speed bump doesn't happen...it is likely, in my experience, that your company will not become a big thing...so....bless the speed bump and don't curse it...
Tuesday, January 15
Monday, November 12
The Venture Capital Tree Hugger
We are all starting to focus on energy conservation. So many of our power plants are powered by high priced natural gas and we are near $100 oil (per barrel). With these types of data points swirling around our checkbooks...we are constantly contemplating how we might save on the high cost of energy.
As an investment firm...we think about plausible immediate solutions that may lower the costs of conventional energy forms and thus leave more savings in the hands of consumers. Many of these happen to be centered on information technologies and how they may be used to better organize inventory flow, reduce theft, reduce operational risks...etc. Sometimes we get tangled in the endless search for the holy grail of technology which will take planet earth by storm. It is sometimes exhausting. It becomes easy to overlook simple solutions.
Over the weekend, I took my kids to the local nature observatory. It was there that I was forced by my kids to slow down and relearn some things that had last been taught to me in grade school...things that didn't matter to me then...but they matter to me now.
Transpiration - In my quixotic HG Wells endeavor for perpetual energy, I had forgotten much about the details of transpiration - this is the passing of moisture from the soil through the plant system into the atmosphere. Heat passes over tree leaves etc...drawing moisture from the leaves. The surrounding air is cooled as much as 9 degrees Fahrenheit but is typically between 5 and 6 degrees Fahrenheit. There are actually some pretty complex calculations to determine the cooling effects of different trees. For a three thousand square foot home covered by 35 foot trees (of average leaf size)...this is the equivalent of 5 tons of air conditioning running for about 20 hours per day. This makes me wonder if the placement of concrete on Planet Earth is partially responsible for global warming (i.e. many fewer trees that are cooling the atmosphere). So depending on how cool you want your house during the summer...we are potentially talking about a lot of money here. For example, a 10,000 BTU window AC unit needs to be fed an extra $5.00/month to cool one room in your house an extra 4 degrees Fahrenheit per month (est. room size is 300 sq ft.). In other words, planting a few trees to cover the sides and top of your house can add up to a few hundred dollars in power savings each year.
I am writing this for one simple reason. I am constantly running 100 miles per hour in the venture capital business and sometimes fail to see something so obviously in front of me (such as planting a tree to save money). But as I heard one time several years ago..."If you really want to make sure something stays hidden...hide it out in plain site."
As an investment firm...we think about plausible immediate solutions that may lower the costs of conventional energy forms and thus leave more savings in the hands of consumers. Many of these happen to be centered on information technologies and how they may be used to better organize inventory flow, reduce theft, reduce operational risks...etc. Sometimes we get tangled in the endless search for the holy grail of technology which will take planet earth by storm. It is sometimes exhausting. It becomes easy to overlook simple solutions.
Over the weekend, I took my kids to the local nature observatory. It was there that I was forced by my kids to slow down and relearn some things that had last been taught to me in grade school...things that didn't matter to me then...but they matter to me now.
Transpiration - In my quixotic HG Wells endeavor for perpetual energy, I had forgotten much about the details of transpiration - this is the passing of moisture from the soil through the plant system into the atmosphere. Heat passes over tree leaves etc...drawing moisture from the leaves. The surrounding air is cooled as much as 9 degrees Fahrenheit but is typically between 5 and 6 degrees Fahrenheit. There are actually some pretty complex calculations to determine the cooling effects of different trees. For a three thousand square foot home covered by 35 foot trees (of average leaf size)...this is the equivalent of 5 tons of air conditioning running for about 20 hours per day. This makes me wonder if the placement of concrete on Planet Earth is partially responsible for global warming (i.e. many fewer trees that are cooling the atmosphere). So depending on how cool you want your house during the summer...we are potentially talking about a lot of money here. For example, a 10,000 BTU window AC unit needs to be fed an extra $5.00/month to cool one room in your house an extra 4 degrees Fahrenheit per month (est. room size is 300 sq ft.). In other words, planting a few trees to cover the sides and top of your house can add up to a few hundred dollars in power savings each year.
I am writing this for one simple reason. I am constantly running 100 miles per hour in the venture capital business and sometimes fail to see something so obviously in front of me (such as planting a tree to save money). But as I heard one time several years ago..."If you really want to make sure something stays hidden...hide it out in plain site."
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