Venture Adventure

In the world of startups, we don’t have to deal with bailing out of a building for loose grenades, or to worry if our team good muzzle discipline.  But we do have to take corrective action with our employees (and ourselves).

Blackfive has an excellent post today on corrective action.  Or, as it’s known in the military, The Art of Ass Chewing.

One can find business ideas almost everywhere these days.  A big category for ideas is new applications of existing technology.

For instance, the National Weather Service notes that it is able to see highway traffic patterns using its Doppler weather radar.  I can see many interesting applications here.  Scale down the radar, and focus on the highway rather than on the atmosphere, and you could have long range highway traffic flow monitoring without the expense of a video camera or sensor network.

Another simple technology applied differently is Apostrophree, which just received a $25 million investment for a spell checker dedicated to blog comments.  While I don’t believe that there’s a $25 million company there, I always enjoy creative entrepreneurship.

Recently, Roger Ehrenberg published his post mortem on his experiences with Monitor110.

Roger’s top-seven mistakes:

1. The lack of a single, “the buck stops here” leader until too late in the game
2. No separation between the technology organization and the product organization
3. Too much PR, too early
4. Too much money
5. Not close enough to the customer
6. Slow to adapt to market reality
7. Disagreement on strategy both within the Company and with the Board

There’s many things that can be discussed and learned by looking at the details of this list.  But when I look at it from a very high level, it all points to 2 major issues — A lack of planning and a lack of leadership.

“Battle is a highly fluid situation. You - You plan on your contingencies, and I have. You keep your initiative, and I will. But what you don’t do is share command. It’s never a good idea.” — Vic Deakins (John Travolta), Broken Arrow, 1996

And this, to me, is a symptom of the web 2.0 mentality of creating a business web-site based on a high concept pitch with no plan and no real leadership.  I guess when the VC is only investing a few hundred thousand dollars, it really doesn’t matter.

But real businesses have an idea of who their customers are, what the customer wants, what the customer is willing to pay, and how the business will make money.  And all of this is known before a single penny is spent.

And real leaders lead!

Edit 1: Fixed Typos

Time can be a real pest when it flys by without you noticing it.

Some time soon (I hope) I’ll be back to writing….

There has been a lot of talk recently, particularly by Obama and the democrats in Congress for re-enacting a Windfall Profits tax on the oil industry. But what exactly are windfall profits and how does this apply to the startup entrepreneur?

The Economist defines windfall profit as a controversial concept, often used by politicians to justify imposing a TAX on PROFIT that in theory is earned unexpectedly, through circumstances beyond the control of the company concerned, and is thus deemed undeserved and ripe for the taking by the tax authorities.

Does this definition fit the current situation? Clearly, the tax authorities (Congress and the Democratic Candidate for President) want to take the profit. And clearly the authorities believe that the profit is undeserved. Many of the proponents of the current proposals for windfall taxes on oil have been claiming that Chevron or Exxon are making $1300 a minute in profit, or a billion a day, or many other shocking claims on the absolute value of the profit. And, if you’re not involved in big business on a day to day basis, the numbers are really, really big.

But are the authorities, particularly Obama and the Democrats, correct?

Here’s a basic analysis using the 2008 Fortune 1000 list.

• Ranked by Revenues, only 2 Oil companies make the top 10. Wal-Mart ranks #1 at $6 billion more than Exxon Mobil. The only tech company AT&T at #10.
• Ranked by Profit, only 2 Oil Companies make the top 10. Exxon-Mobil ranks #1, but GE takes #2 before Chevron’s #3. In tech, Microsoft ranks 6, and AT&T 9.
• Ranked by Net Margin, no Oil companies make the top 10. Exxon-Mobil, with 10.9% margin ranks 219. Chevron, with 8.9%, ranks 298. This compares to Microsoft (27.5%) at 25 and Google (25.3%) at 34.

It will take a long time for a startup or entrepreneur to make the F1000. However, high-tech businesses do have high profit %. Looking at the % ranking, we see Mirant, an electricity generator at 70.9%, which may be an outlier, as the next in rank is Blackstone, in the PE business, at 53.2%. Gilead Sciences, at #7, is at 38.2%.

When I created the financial model for my business, I calculated a 39% net profit long-term. Looking at these figures, I don’t find it completely out of the question. Of course it’s aggressively high. But if I don’t shoot for that goal, I’ll never create a real business.

On the other hand, it is pure hubris for Congress to go after the oil business, and to not, at the same time, attack GE, Bank of Ameria, or the Oracle of Omaha.

The Rankings

Top 10 Gross Revenue

Top 10 Net Profit

Top 10 Profit %