The kind of feedback tech startups need

Blue Prism just got a great write up about their work with the Co-operative Bank, where their software is increasingly being used to automate processes.
It's great when a large company is willing to help spread the word for a relatively young company like Blue Prism, it's a simple and comparatively painless way in which a large company can support a supplier.
What I find slightly disappointing is that it seems to me that very often the large purchaser will not offer their vendor this kind of support. For example, Blue Prism has some other similar companies who appear more reluctant to go on the record about their work with the company.

What type of web startup are you?

Rail Mail Sorting Slots
Originally uploaded by Potjie

I had a very thought provoking conversation yesterday with Lee Strafford the former CEO of Plusnet about web companies. One part of the conversation I think might be interesting was around classifying the different types of such companies by the way in which they build competitive barriers:

Class of barrier	Characteristics
Tech Heavy	Some piece of technology is strikingly difficult to do, perhaps requiring realtime communication or tricky client software to make it work. These companies can take a little longer and can raise money earlier in the adoption lifecycle due to the inherent IP. We've got a couple of these in the works, but they're in no hurry to tell the world what they're up to!
Execution orientated	In these cases the company is not doing anything that technically that groundbreaking, but they're getting the business model, user experience, pricing etc. right in a way incumbents with more inertia would struggle to do. Here the key is about speed and quality of execution. I think I'd probably put Yuuguu in this category at the moment...
Critical mass orientated	Lots of web1.0 gravestones here! This is where you have to find ways to get the kind of critical mass of users which means that the service can gain a strong lead. This is more like the Facebook model. To be honest we've only tried this once and we ran out of capital before we reached critical mass. You can't sell these early and the key is probably to find ways to reach that early audience cheaply. I believe that Facebook did this early by getting links with US colleges.

Perhaps it's interesting to think which model fits your company best, and then what that implies for strategy?

Yuuguu off to DEMOfall

I'm delighted that Yuuuguu are presenting some great new stuff at Demo in September. I think it'll be really well received. If you're thinking of going there's a useful discount if you click via the following Yuuguu off to DEMOfall 07.

The "Lucky 13"- Managing cash gaps in technology companies

Back from hols :-)
Over the years a number of useful tips about how to manage cash in early stage tech companies. It's really commonplace for such companies to have sticky moments waiting for cash to come in from customers, investors etc. and it can be very handy to know some of these hints....

CAVEAT!! If you're this close to being out-of-cash then knowing the solvency situation of the company at any time becomes important, and as a board it should be considered carefully and frequently. I can't endorse the use of any or all of these in any situation on a blanket basis- it's more complicated than that!

Please let me know any improvements or changes to this list via the comments- I'll update it accordingly. Thanks.

Area	Tool	Comments
Managing Ordinary Creditors	Paying late	Careful, you mustn't favour some creditors over others, but generally you should look to the timing of each creditor payment to see what really needs to be paid when. (OK that one was obvious!)
	Paying erratically	One FD I know favours paying erratically from the outset, but paying reliably. So, if sometimes you pay at 10 days, sometimes at 30, other times at 50, then your creditor may get used to the fact that you're inconsistent but reliable. this could give you a bit more slack when you need it most. Contrast this with the company who always pays bang on 30 days. If you don't pay by 31 the credit controller will be on the phone!
	Early payment terms	I've found that many start ups are so keen to impress their customers, and so keen not to draw attention to their small size that their reluctant to go for strong payment discounts. Likewise they tend to favour rental models over upfront models in the face of the economics (see below and here.)
Salaries etc.	Transferring cash	If the new cash is very close, but is going to miss the BACS payment deadline for the salary, it's handy to know that you can usually pay your staff using a same-day payment mechanism from the bank (for a fee). The extra few days saved can occasionally be a lifesaver.
	Staff late payments	If some of your staff are willing to work on the promise that they'll be paid shortly after the transaction that can be great. Watch out though, because there's a chance that you'll still have to pay the PAYE and NI. It can be helpful to get a formal waiver from the staff of some kind- so the company accrues the cost but doesn't necessarily trigger the tax.
	Payment date	During the early optimistic days companies often like to offer their staff a relatively early payment date in the month. Pushing that back as a matter of routine early can make sense and saves you having to ask the staff for the concession at a key time.
	Cost of directors	If things are tight the directors may be willing to work for nothing- make sure you keep accruing the costs otherwise the next round investor may get shirty if you want to pay them the back fees post transaction.
Banks and investors etc.	Bank	Banks need attention well in advance of the cash demand if you expect them to be sympathetic. Especially important if you've a loan already as bad news can give them the jitters.
	Investor bridge	Keeping your investors fully up-to-speed and informed is the key to this one, but if there's real evidence of close cash from either customers or investors it's useful, if unlikely to be cheap!
	Director's loan	Not really where anyone wants to be!
Other etc.	R&D Tax Credit	I'm no expert on R&D tax credit, but it's proved a godsend to companies on tight cash on several occasions (thanks Gordon!). Two caveats- you can only claim as cash up to the limit of the previous years PAYE+NI, so if you've been mean and lean and had no full-timers then it's not going to help much. Second, you CAN do a short financial year to claim early, but remember that you can't keep doing short years from a Companies House PoV- hence never change year end for convenience reasons, keep it up your sleeve for rainy days. It takes a couple of months minimum to go through the process of closing your year and making the claim, but handy none-the-less.
	Grants	Frankly, unless you saw it coming months earlier this is only likely to help around the edges.
	Customers (my favourite!)	The ingenious amongst you will probably have a whole set of crafty ways to extract cash from your customers wallets. One particularly appealing idea is to offer to convert existing rental customers to perpetual licenses for a tempting once-off price.(see this post.

Why did a satellite tv company want to buy a set top box company?

So Sir Alan Sugar has 'fired' his creation Amstrad for what has been reported to be £ 125m gbp -(around $ 260m usd) on a PE of about 6. I can see why he'd want out- Amstrad may be concerned about commoditisation and the threat from the Chinese entrants. But even the Ovuum analyst on the news last night was struggling to find a reason why Murdoch's Sky would want to buy them. In the Guardian piece various analysts provide rather weak justification about improved time-to-market, but it'd be hard to see that Sky is currently competing with Virgin media on that basis at the moment anyway.
Sky has had a reputation for being a canny buyer of set-top-boxes and is in a position to drive a hard bargain from its suppliers- surely it didn't need to own one just to get suppliers to do what it wants quickly.
The only reason I can think makes sense is that Sky's purchase is not to get their mits on this generation of product but because they are looking to the next. This might seem sort of obvious, my speculation however is that it's because they need to own the STB company. That would let them build their own "locked-down proprietary" set-top boxes, and might help Sky persuade Hollywood that it's really secure. At that point they might be able to get access to the kind of premium content that the AppleTV box carries. Better yet- they have a delivery channel via the satellite to send over high popularity High Definition content that'd struggle to get down the narrow ADSL pipe.
These kind of changes may seem tectonic to our portfolio companies, but that doesn't mean they're irrelevant.
NB the above is no more than a theory compounded on speculation- I have no actual knowledge of the situation or link with either company! If you know/think better (or can corroborate!) please do so below.

Business plan obfuscation: Twitter style

Scoble points out that there's a difference between "not having a business plan" and not telling the world what your business plan will emerge to be. I like the term "Business plan obfuscation" too- that's a handy label! However I'd suggest that there's a halfway house between investors backing the eventual business model, and investors backing the public business model: it's not that uncommon for a company to have several business models available to pursue, some more ambitious and flaky, others more concrete and modest.
I've seen investors back the same company, but on different expectations of which business model will pan out- that can be OK if there's enough cash to properly reach a decision, but generally it's better if everyone has the same goal.
Sometimes the plan VC's actually bought into at the start is the same as the plan the company wants to tell the world about at that time, and the same as the plan that produces first revenue and also the plan that results in the big exit. However, often it doesn't quite work out that way! I think most VC's get this; I'm sure that when Fred Wilson quotes what he said about Del.icio.us being the same for Twitter: "The question everyone asks is "What is the business model?" To be completely and totally honest, we don't yet know.", then the key here is the "the",Twitter may today show the world only a "geek-trendy" product, but I'd suggest that they may be several business models in the works, with different revenue streams, different risk profiles and different work profiles.
However, it's interesting to note that when Yuuguu launched its truly free screensharing service there was suspicion from some potential users about the company's business model. If you're "free" it can be important that people understand if there's some "hook" that will kick in if they start using the service. Now that Yuuguu has launched it's low-cost international conference call service everyone can see their long-term business model, or maybe they are just seeing the first revenue model...

Role of the Chairman in Early Stage Technology companies

The Role of a chairman in early stage tech. companies is a little different from the standard in a small company due to the emphasis on growth and support of a growing team.

Aspect	Comments
Team Building	Contributing to the management development plan Mentoring and support for the CEO- acting as their private sounding-board Leading the process of recognising the need to change CEO and the search for the new CEO Monitoring the executive team's relationships and bringing action if conflicts arise Monitoring the performance of the executive team and actioning required change Providing discreet feedback and guidance for the CEO Conducts formal CEO appraisal/performance review Assists CEO in selection of exec board members
Financial Governance	Ensuring financial reporting is regular, clear and appropriate Taking a lead role in negotiating remuneration In the absence of a dedicated FD, having oversight of the accounting process Recognising future cash requirements and ensuring the board deals with cashflow planning well in advance
Strategy	Leading on the development of the company strategy Ensuring that investors interests are properly represented by the strategic options presented to the board Mentoring the CEO on the strategic development
Fundraising	Providing a second voice in fundraising discussions Opening contacts for fundraising and corporate events Providing independent feedback to investors on fundraising comments Gathering feedback from investors on their view of the exec team
Representing Shareholders Interests	At all times to remain clearly focused on the interests of shareholders over management Providing independent feedback to investors on the state of company and management Ensuring transparency of information flow between management and shareholders
Proceedings at Board Meetings	Collects input from all directors and management on the board agenda - this facilitates surfacing difficult issues. Creates the board meeting agenda with the CEO. Ensures report(s) have been issued well in advance of the meeting Runs the agenda of the board meeting, holding items to schedule or extending the time spent on them if the consensus is to spend more then the appointed time on an item. This frees the CEO to focus on content and allows the Chairman to keep the meeting on track. Gathering input from, and providing feedback to, shareholders from the board meetings.

Obviously all this is in addition to the normal obligations of any director!