Monday, November 30, 2015

1871 Hosts Fireside Chat with Dennis Chookaszian and 1871 CEO Howard Tullman

       In a recent fireside chat, Dennis Chookaszian, the long-time CEO of CNA Insurance and more recently a substantial angel and early-stage investor and advisor to numerous public and private companies, departed from the usual plethora of pompous pieties and platitudes that seem of late to comprise the primary content of far too many typical technology panel discussions and got down to sharing some concrete and very specific advice for startups, some concise rules of thumb and formulae which he uses to evaluate the likelihood of a startup’s success, some thoughts about the criticality of scaling swiftly, and a few closing comments about the importance – early on – of paying attention to matters of ethics and the core values of the business you’re trying to create. As I like to say, you can’t build value if you have no values. See   In terms of sheer content, straight talk, and take-away value, this was one of the best talks and Q&A sessions we’ve ever had at 1871.

Dennis is a guy who – as much as it’s ever possible to do so – has really refined his investment strategy and approach and made a science of how he looks at prospective investments. In addition, it was clear that he’s thought long and hard about exactly how he advises young entrepreneurs on what they can realistically expect on their journeys and the best ways to prepare themselves and their companies for the very bump roads and precarious paths ahead. He noted that he’s often approached by folks for help in raising early stage capital or providing senior level introductions for them to large firms and – as often as not – he says that while he could help, he won’t - because he doesn’t think that it’s the right time for them to raise capital or that taking in investment capital (even if it’s abundant and readily available) is the right approach for the development stage of their businesses. In the startup business, you eventually learn that a quick and honest rejection is a lot more helpful in the long run than a grudging or half-hearted favor that ultimately does neither party any good.

As you might expect, the discussion started with what he called the “rule of three” which is a simple way to think about the need to focus the scarce resources and bandwidth of the entrepreneur on the most critical and pressing issues for the business. He said that – as a general proposition – it’s almost impossible to pay attention and devote your energies to more than 3 or maybe 4 critical concerns at a time. As Confucius probably should have said: “Man who chase too many rabbits end up with none.”

The three most important areas that Dennis felt every startup needed to concentrate on were: 

(1)  Substantial and Sustainable Revenue Grow

If you can’t determine early on who is going to pay you for your new product or service and you haven’t demonstrated that the dogs are gonna eat the dogfood, then it’s highly likely that you don’t have a viable business. In addition, your business model and your actual results need to realistically demonstrate an achievable market size and a path to securing market share sufficient to show early exponential revenue growth. Dennis’s shorthand for this criteria was T2D3 which meant that your year-over-year revenues were expected to triple in each of the first two years and then to double in each of the next 3 succeeding years of the business.

Dennis shared some very specific and detailed criteria with the group about how each business should look at the nature and quality of its revenues in order to determine whether they were on the right path. The four critical factors were: (a) businesses building recurring revenue bases are far better than ones dependent on constantly securing new business especially because renewals are much easier and less expensive to secure than new sales; (b) the customer retention rate of the business was absolutely critical – all customers are very costly to acquire and very easy to lose today in a world of almost infinite choices and alternatives; (c) businesses based on products or services having a steady stream of new customers or ones that required constant replacement or renewal (the “razor blade” model) were much more attractive than durable goods businesses (like selling refrigerators) where the products had very long repurchase or replacement life cycles and could even fairly quickly reach points of substantial saturation; and (d) businesses offering products or services which had a predictably high rate of obsolescence were much more attractive than those where the products had long useful lives.

Finally, Dennis was also brutally frank with the audience about how frequently startups fail. While he believes (as noted above) that the most recurring cause of early business failures is a lack of sufficient and rapidly-expanding revenues, he also noted the problem with pointless perseverance. He said that very often the biggest mistake an entrepreneur can make is trying to stay the course and waiting too long to bite the bullet and either pivot quickly or decide to shut the business down if it’s not making the necessary progress. I like to say that there’s nothing worse than profitless prosperity where your top line keeps growing, but there’s no bottom line in sight. He pointed out that establishing some milestones or benchmarks for measuring your business’s success over a fixed period of time and then sticking to those metrics either way – in good times or in bad times – in deciding your next steps is a form of management discipline that is essential. See  .

(2)  Resisting Raising Too Much Capital Too Soon

           Dennis is a bootstrapping hardliner. He doesn’t agree with the “appetizer rule” to wit: that the time to eat the appetizers (or raise new money) is when they’re being served or available. He believes that you should raise as little as you can for as long as you can regardless of how easy it might be at a given point in time to secure new funding. For a contrary view, see: .  He also said that you should only seek outside investment (and only as much of an investment as you realistically will need) once it’s clear that you have an actual business with provable revenues that is going to grow and prosper. Otherwise the outside money will cost you too much and – probably worse for you and the business – conceal the fact (or defer the unhappy realization) that you haven’t really figured how to operate and scale the business in a profitable manner. He noted that mega-incubators like 1871 are great places to get started because they enable entrepreneurs to avoid all kinds of costs and commitments that are bad uses of their scarce capital and – at the same time – to secure access to enormous amounts of “free” resources, education, networking and mentoring that will all be crucial to their long-term success.

          (3) Leadership and Ethical Values

The smartest investors bet on the jockey and not the horse and nothing is more important for the success of the business than the strong leadership skills of the senior management team. And, because the required skills sets will change dramatically over time as the business grows, it is also critical that the management be sufficiently flexible that they can grow and adapt to the new requirements of the business. Dennis noted that this is a very rare outcome and that it is unusual for the CEO of a startup to survive in that role beyond a certain point in terms of the company’s revenue growth, market(s) size and share, etc.  It’s very clear that entrepreneurial and managerial skills are quite different and specifically the CEO’s role and involvement in various functions and parts of the company will need to change materially as the years go by or the CEO will need to be changed.

What cannot change and what is critical from the outset are the values that the company develops and builds upon as it creates its own internal and external culture and, here again, it is the CEO whose behaviors and attitudes are the most critical in providing the essential role model for the rest of the company. Mission statements are a dime-a-dozen these days and all the talk doesn’t mean a thing if your actions and behaviors aren’t aligned with your professed beliefs and values. Over time, the values of each business will develop and the priority of certain concerns and considerations may change somewhat, but it’s a very slippery slope that needs to be jealously guarded because it is very hard to ever recover from the damage that results from broken promises and commitments. By and large, values don’t abruptly break; instead they crumble a bit at a time. I like to say that it’s much, much harder to live up to 99% of your values than to honor them 100% of the time.

Dennis said that each of us needs to determine which values are most important and that we all need to establish an ethical framework. Once you have established those ground rules, it’s crucial that you also make it clear that there are boundaries and bright, red lines which simply cannot be crossed. While people are people and we are all fallible, there are just some behaviors which no business can abide or afford. In other situations, some understanding and forgiveness and a second chance might be the most appropriate response. 

In his view, everyone has a three tier ethical framework and the critical issues in each case are what behaviors are in each tier and then which tier a particular case of questionable behavior falls into. The three tiers are (1) Zero Tolerance; (2) Possible Rehabilitation; and (3) Everything Else. Behaviors which fall into the first tier are (1) honesty/integrity breaches and (2) any kind of abusive behavior. There is simply no way back from these kinds of problems and any proven violations must result in immediate termination. Violations that impair the core values of the business cannot ever be tolerated.

Other issues which fall into the second tier – personal problems, substance abuses or performance problems – can potentially be remedied by giving the offender a chance to correct the problem.  But these cases must strictly a one-shot opportunity to get things straight and any repeated behavior needs to be swiftly dealt with and the person must then be terminated.  

Everything else can and should be dealt with through the normal management and HR processes. By and large, these cases should not involve the senior management team. Only those instances which impact the business’s basic culture and mission are serious enough, central enough, and important enough to be reinforced and reiterated through the involvement and behaviors of the business’s leaders. People, since time began, have paid attention not to what we say, but to what we do. Some things never change.

Thursday, November 26, 2015

ADELE - 25


Damaged goods is all I see.  Hardened faces look back at me.  Where are all the innocents-unscarred by the battle.

Damned in the midst of paradise

Dare to dream out loud.

Daring ideas are like chessmen moved forward; they may be beaten, but they may start a winning game.

Darwinian chance rather than providential design determines what happens.

Das Rheingold:   Beware! / For when you men / serve my might / the dwarf will take his pleasure / with your pretty women / who scorn his wooing / though love does not smile upon him.

Data are not facts.
Facts are not information.
Information is not knowledge.
Knowledge is not truth.
Truth is not wisdom.

Data beats opinion.

Data-driven design narrows your attention to incremental improvements rather than quantum leaps. It makes you think you’re approaching an apex when there may be huge additional opportunities which lay beyond that point.

Deal with it

Death ends a life, not a relationship.

Death is afraid of him because he has the heart of a lion.

Decadence is deliberate cruelty.

Decency is a relative thing.

Deception is invariably practiced on the self before others.

Decide on what you think is right, and stick to it.

Decisions are a lot easier to make when you know what your values are.

Deep down, he’s very shallow.

Deep pockets don’t sue shallow ones.

Deeper analysis does not always lead to keener judgments.

Defeat is worse than death because you have to live with defeat.

Defects that are invisible to the knowledgeable may be obvious to the newcomer.

Deformed by fantasy-mutilated by reality.

Deja new

Delay only compounds mistakes.

Delight turns very quickly to expectations.

Democracy in meetings is not a value in itself.

Democracy is like blowing your nose.  You may not do it well, but you ought to do it yourself.

Democracies don’t make great products. You need a competent tyrant.

Denial is an ineffective strategy.

Depression doesn't necessarily kill a person's sense of humor.

Depression is merely anger without enthusiasm.

Description is more valuable than metaphor.

Design for the biggest impact.

Design isn’t about how things look; it’s about how well they work.

Design is not veneer, it is the fundamental soul of a creation.

Design is the ability to create something that has significance as well as usefulness.

Desolation is not the same thing as emptiness, because unlike emptiness, it can fill a space.

Despair gains its cachet by its uselessness.

Desperation, not vision.

Desperation is the raw material of drastic change.  Only those who can leave behind everything they have ever believed in can hope to escape.

Destiny is not a matter of chance, it’s a matter of choice.  It is not a thing to be waited for, it’s a thing to be achieved.

Destiny, quite often, is a determined parent.

Detail is the difference between ordinary and extraordinary.

Develop an interest in life as you see it; the people, things, literature, music-the world is so rich, simply throbbing with rich treasures, beautiful souls and interesting people.  Forget yourself.   (Henry Miller)

Die fast and quiet when they interrogate you or live so long that they are ashamed to hurt you anymore.

Difference between a mishap and a tragedy.  If Gladstone fell into the Thames, it would be a mishap.  If anyone pulled him out, it would be a tragedy. (Disraeli)

Difference between cheese and chalk.

Different isn't always better, but better is always different.

Difficulties exist to be surmounted.

Dig your well before you're thirsty.

Digital is like hydrochloric acid, it burns through everything.

Dijon vu – the same mustard as before.

Diplomacy is the art of letting someone else have your way.

Direct your efforts more to preparing youth for the path and less to preparing the path for youth.

Directors are like boxers. They need to know when to hang up the gloves.

Disasters do not simply occur; they evolve.

Discipline:      1. Do what has to be done
                        2. When it has to be done
                        3. As well as it can be done
                        4. Do it that way all the time

Discipline is a convenient way of avoiding an adjustment to rapidly changing

Discipline is always worthwhile.

Discipline is just the job of choosing between what you want now and what you want most.

Discipline yourself.

Discontent is the first necessity of progress.

Discoveries are happy accidents.

Discovery is seeing what everybody else has seen, and thinking what no one else has thought.

Disorganization is a kind of anesthesia.

Distance is dead.

Distance would lend enchantment to the view.
Distress is soil for growing businesses.
Distributed problems require distributed solutions.

Diversification neglects comparative advantage. Specialization is the best way to lower risk.

Do a few of the right things well.

Do a few things very well.
Do a limited number of things very well—not a mile wide and an inch deep.
Do I have to give up me to be loved by you?

Do it, fix it, learn.

Do it or not. There is no try. (Yoda)

Do it right the first time-do it very right the second time.

Do just once what others say you can't, and you will never pay attention to their limitations again.

Do less better.

Do not become an archivist of facts.  Try to penetrate to the secret of their occurrence,  persistently search for the laws which govern them.

Do not become the slave of your model.

Do not expect justice where might is right.

Do not feel certain of anything.

Do not forget an old act of kindness because of a recent dispute.

Do not go gentle into that good night/Old age should burn and rave at close of day/Rage, rage against the dying of the light.

Do not go where the path may lead, go instead where there is no path and leave a trail.

Do not insult the mother alligator until you have crossed the river.

Do not keep away from the measure which has no limit, or from the task which has no end.

Do not let your fire go out, sparked by irreplaceable spark, in the hopeless swamps of the approximate, the not-quite, the not-yet, the not-at-all.  Do not let the hero in your soul perish, and lonely frustration for the life you deserved, but have never been able to reach.  Check your road and the nature of your battle.  The world you desired can be won.  It exists, it is real, it is possible, it is yours.  (Ann Rand)

Do not look where you fell, but where you slipped.

Do not seek to follow in the foot steps of the masters; seek what they sought.

Do not spoil what you have by desiring what you have not; but remember that what you now have was once among the things you only hoped for.

Do not understand me too quickly.

Do not use a hatchet to remove a fly from your friend's forehead.

Do not wait; the time will never be “just right”.  Start where you stand and work with whatever tools you may have at your command, and better tools will be found as you go along.

Do not wait for the last judgment.  It takes place every day.

Do not wish evil for your enemy, plan it.

Do one thing every day that scares you. (Eleanor Roosevelt)

Do something unscalably laborious.

Do what’s easy and life is hard. Do what’s hard and life is easy.

Do what matters to you and someone else.

Do what you can.

Do you believe in all this success?  It's like wine.  You don't believe in wine.  You drink

Do you love life?  Then do not squander time.  For time is the stuff life is made of.

Do you think you can fart your way out of it?

Do your duty and leave the outcome to the gods.
Does anyone have any questions for my answers?

Does the name Pavlov ring a bell?

Dogs don’t bark at parked cars.

Dogs move through our culture as a kind of unresolved issue.

Doing business without advertising is like winking at a girl in the dark; you know what you're doing, but no one else does.

Doing the right things instead of doing things right.

Doing well is not enough if you can do better.

Dollar bills are not the same as brain cells.

Done is better than perfect

Don’t allow yourself to be defined by others’ limitations.

Don't argue with the truth.

Don't ask questions of fairy tales.

Don’t ask yourself what the world needs; ask yourself what makes you come alive. And then go and do that. Because what the world needs are people who have come alive. 

Don't avoid voiding.

Don't be afraid to make mistakes.  If you take a fall, it's because you're learning, and that's better than playing it safe.  The name of the game is not to be right all the time.  The name of the game is to win.  There's a big difference.

Don’t be afraid to take a big step if one is indicated.  You can’t cross a chasm in two small jumps.

Don’t be pushed by your problems. Be led (drawn) by your dreams.

Don’t be reckless with other people’s hearts.

Don’t blame content.  If you put a monkey in a car, it’s not the car’s fault.

Don't confuse bad management with destiny.

Don’t confuse frequency with loyalty. You may have no choice but to use something.

Don’t confuse the headlines with the trend lines.

Don’t cry because it is over, smile because it happened.

Don't deprive yourself of the joy of giving.

Don’t develop anything that you don’t want to make, and don’t make anything that you can’t sell.

Don’t eat yellow snow.

Don't embarrass the bread.

Don't ever confuse good manners with agreement.

Don’t ever darken my toilet paper again.

Don’t ever take down a fence until you know why it was put up.

Don’t expect empathy from losers.

Don't expect others to listen to your advice and ignore your example.

Don't expect others to take as much interest in you as you do yourself.

Don’t fall in love with your model and forget your mission.

Don’t fake it until you make it. Fake it til you become it.

Don’t feed the troll in blog space.

Don't find fault.  Find a remedy.

Don't find fault.  Find a solution.

Don’t force the gates.
Don’t get in front of a ball rolling down a hill.

Don’t get out of the Trojan Horse before you’re inside the castle.

Don’t guess, ask.

Don't hold the penny so close to your eye that you can't see the dollar behind it.

Don't invest too much in a charismatic leader.

Don’t judge people by their relatives.

Don’t just think it; ink it.

Don't learn the tricks of the trade.  Learn the trade.

Don’t leave it to others.
Don’t let a little dispute injure a great friendship.

Don’t live with your mistakes.

Don’t look backward unless that’s the direction you’re headed.

Don’t look down, don’t look back.

Don’t look to me for the answers.  All I want you to use me for is approval.

Don’t major in the minor.

Don’t make ads. Make news.

Don't mistake activity for achievement.

Don't mistake bad ideas for bad intentions.

Don’t pay attention to the critics—don’t even ignore them.

Don’t pee on my leg and tell me it’s raining.
Don’t play the rooster in front of the wrong house.
Don’t punish the wrong people.

Don’t put a period when God put a comma.

Don't say yes until I finish talking.

Don’t spend your time on things you can’t change. Spend it thinking about what you can.

Don’t stop believing.

Don’t tell me the good news—it takes care of itself—tell me the bad news.

Don’t think for a minute that power concedes.

Don't think of me as a monopoly; think of me as a company that enjoys 100%
customer loyalty.

Don't think of me as your boss, but as a friend who's always right.

Don't threaten a child: either punish him or forgive him.

Don't throw away time on useless resentment or try to see who can hold out longest in stubbornness.

Don’t try to bend a stubborn heart.
Don’t try to buy low.  That’s like trying to catch a knife.

Don’t try to close too fast.

Don’t try to do something cheaply that shouldn’t be done at all.

Don't try to get to heaven in one night.

Don't try to sell the skin of the bear until you have already gone out and killed it.

Don’t try to suck up or even be nice to your intellectual inferiors.  They’ll only hate you more for it.

Don't use a plan as a major input to the decision-making process.  Use it mainly to recognize change as it takes place.

Don’t view your career as a linear progression.

Don’t want to be with the “cool” people – what to be with your people.

Don't waste money, don't make bad karma, if life give you lemon tree, then piss on it every day and take shower!

Don’t waste your energy on the ugly.  Save it for the beautiful.

Don't watch the underclass.  It's more likely that the warlords will kill you.

Don't worry, the next generation will understand you.  The real challenge is to try to convince your peers.

Doubt of whatever kind, can be ended by action alone.
Drama often obscures the real issues.

Dramatic change often comes as a response to imminent collapse.

Dreams are necessary to life.

Dreamers never lie.

Dreams with deadlines.

Dress like a bourgeois; think like a revolutionary.

Drinking water from a fire hose.

Drinking your own bath water.

Drive fast.  You’re harder to hit.

Dry shit don’t smell until you kick it.

Dumb as a sack of hammers.

Dunbar Number: Maximum Number of Strong Relationships One Person Can Have (150 approx)

DWIM: Do What I Mean.

ADELE - 25


(ADELE - 25)

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