Are You Chained to Your Marketplace?

Geekwire published an insightful article on the challenges of tethering to any online marketplace, as booking decline for homeowners while Expedia makes changes at HomeAway. Marketplaces like Zillow, Trulia, HomeAway, & AirBNB can be a real boon for small businesses, but can quickly changes the rules, challenging a business’ revenue and profit.
Any thoughts on the for-sale real estate vertical or other sharing economy businesses?
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Hustle, Not Muscle: The Key to Lifelong Success

This blog post was originally published by on ActiveRain.

Has anyone with true hustle ever failed?  Have ever you met or known anyone
who hustled and did not achieve their goals?  Me neither.

I was recently asked to speak on a panel to MBA’s from the University of Utah talking about Seattle, technology and entrepreneurship.  We had a GREAT panel of speakers: Kevin Nakao of MeritShare, WhitePages, RealNetworks; Will O’Brien from Big Fish Games & TrialPay; Edward Yim from ClassifiedAds and Blue Moon Ventures, and Meredith Turner from PitchBook and WhitePages.

Much of the panel was the standard stuff – how did you end up in Seattle, how does Seattle compare to Silicon Valley, and what is the hiring environment like?  Inevitably you get down to the question of: what advice do you have for finding a job or for life in general?

Down the line, every panelist gave the same answer: HUSTLE.

It is very rare to put five people on a panel and they all agree that pure and simple hustle and effort are the keys to success.  Kevin gave an example of how he broke into the music industry by showing up in LA, knocking on doors and working for free, until someone gave him a job.  Will talked about how he managed to open up the “London” office for his former consulting company by cold calling companies in the UK until one of them listened to his pitch.  He landed a $15m engagement from this UK company, which ended up being the largest consulting project for his employer.  Edward talked about raising a search fund out of business school by asking people he did not know for money to go buy a company.   Hustle is at the heart of every example.
When I think about my own career, I would say hustle and fear are a powerful combination.  Throw in serendipity or luck and you have a recipe for success.  As the CTO of my former company Bio Architecture Lab Yasuo Yoshikuni would say, “The more shots on goal you have, the more you score.”   When I was CEO of Bio Architecture Lab, we were commercializing a technology to convert seaweed into low cost biofuels and chemicals.  I started with the company in March of 2008.  Shortly thereafter oil prices peaked at $140 per barrel and then crashed below $60 per barrel, making it that much harder to commercialize new clean technologies at a price competitive with oil.   Simultaneously, Lehman Brothers failed and the financial crisis ensued, taking the entire financial system with it, making it even harder to raise financing for a speculative cleantech venture with unproven technology.

The fear of not raising money and having Bio Architecture Lab fail pushed me to be more aggressive in seeking out financing.  Though it wasn’t pretty, we threw immense amounts of spaghetti against the wall to see what would stick.  We continued to speak with venture capitalists.   Additionally, we sought out commercial partnerships and government grants.  AND we looked internationally when things looked bleak in the US.  In the end, we ended up raising $8m in venture capital from Norway, Chile and the US, we raised $12m in government grants from the US and Chile, AND we raised $15m in a commercial partnerships with Statoil & DuPont.  All in all, we raised $35m in financing (only $8m of which was dilutive from venture capital), in the WORST financial market in history.

Though luck played a big role, hustle was our muse and fear was our motivator.  We spoke with 120 venture capital firms to get three yes’s.  Similarly, we spoke with any oil or chemicals company willing to speak with us and applied for every government grant possible, even in Chile.

In the title of the blog, I talk about “Hustle, Not Muscle.”  Many times, we get very used to resting on our laurels or the success of our last job or education.  Every now and again, each one of us has a moment, generally when interacting with someone younger than us, when crudely we think, “Do you know who I am?”

Just like lifting weights, we can become really good or skilled at a very narrow competency or skill set.  We can become blind to competition or major changes happening in the industry.  That young, inexperienced person who has no idea who you are is going to want it more than you and they are going to OUT-HUSTLE you to the prize.

Yes, you may be a twenty year veteran of the industry, but times are a changing my friends.  There will always be someone who wants it more and is willing to work harder to get it.

At the same time, behind every success is a successful person with HUSTLE.

Work hard.  Throw lots of spaghetti against the wall.  A few strands will stick.  Those few strands can make all the difference in life and a career.

(I was hiking in Lynn Canyon outside of Vancouver and came across this memorial bench to Philippa Ellaway who said, “Running is the greatest metaphor for life: you get out of it, what you put into it.”  So true, so true.  I had to Google Philippa Ellaway when I got home.  She sounds like she was an amazing woman.)

Should Everyone Join A Start-up? Freakonomics Podcast on Rock Bands

Del Fuego’s & Tom Petty

Great Freakonomics episode on joining a rock band and being successful. Very similar to tech start-ups ironically.

Zanes, “I think that the music business is best for those who have a capacity to weather a chain of disappointments. You know, ’cause if you can only handle one, you should probably go work at the florist, you know?”

http://freakonomics.com/2015/11/12/should-everyone-be-in-a-rock-band-a-new-freakonomics-radio-podcast/

2015-11-04 10.16.02

Visiting the Amazon Book Store at Seattle’s University Village

I visited the NEW Amazon book store in Seattle’s University Village shopping center.  I have to admit, I was pretty underwhelmed by the experience.  It felt … well… like a book store, specifically a small Barnes & Noble bookstore.  The middle of the store featured Amazon’s consumer electronics like the Kindle, Fire and Alexa.  I was expecting or hoping for a lot more of the future of reading and literature and less of the actual books.  Yes, Amazon is using their data, reviews and ratings to select and merchandise the inventory in the store, but the store did not capture my imagination of the what the future will hold similar to an Apple store or [gasp] a Microsoft store.

But the Apple store was not built in a day.

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Pictures from the Amazon Store in Seattle
Pictures from the Amazon Store in Seattle

2015-11-04 10.17.06

Stop Budgeting and Start Planning!

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Originally Posted on ActiveRain

It’s that time of year again: BUDGETING

Executives and business managers around the world are TRAPPED in conference rooms trying to create plans and budgets for the upcoming year.  And then they need to revise and rationalize their budgets after review by the CFO.  And then they need to revise and rationalize their budgets again after review by the CEO.

Rinse and repeat.  Rinse and repeat.

Why are all “budgeting” processes largely a waste of time?  Finance teams and executive team need to think about continuous strategic planning, instead of budgeting.

What do I mean?

The current budgeting exercise is a pure unadulterated tragedy of the commons.   I, as an exectuive,  throw my full budget requests into the pot as there is limited personal downside to my requesting more budget so that I or my people work less or I have greater probability of hitting my objectives.   In a company, there is limited upside in executives or managers doing more with less.  I have never seen a business manager say “increase my revenue target, ‘cause I have a lot of gas in the tank.”  Even if the CEO or CFO keep the revenue forecast flat, I guarantee that executives would start coaching the numbers down.  It’s just human nature.

The CEO and CFO of a company need to be excellent at strategic planning.  “Budgeting” should be happening everyday and there should never be a budgeting cycle where executives have a free pass to reset their expense budgets and increase headcount.

So how does the CEO and CFO move from budgeting into strategic planning:

1) Back of the Envelope Model: The CEO should maintain a back of the envelope financial model for the company.  It should not be more than 20 lines in Excel.  It should clearly communicate to every executive and employee what the key levers for the business are to achieve an aggressive revenue target.  If the CEO cannot communicate this, it is likely he or she  needs to work harder to be crisper with his strategy and how the business model works.

2) Look at Investments, Not Expenses: Every dollar of increased expenses need to be viewed as an investment with a return on investment.  Too often, managers argue to increase expenses without justifying a financial return to the business.  Any time an increase in expenses hits the CFO’s desk, the CFO should quickly understand the return on that investment in a dollar metric.  For example, the return on investment for adding a sales person, a marketing manager or an engineer should be easily understood in a common language.  That language is a simple return on investment calculation – dollars returned to the business for dollars invested by the business.   That means for every incremental dollar being spent, you should have a strong perspective on the financial return on those dollars.  The entire company should share in this mindset.

3) Aggressive Accountability: Executives and hiring managers should be held accountable to justify the return on investment for ther headcount and their expenses.  This is a really unusual thing to say and it rarely happens.  The CEO and CFO should be pushing their executives and their managers on the financial return and the investments they are making every day in their business.   The CFO should be challenging the CEO and other executives based on the underlying drivers and unit economics of the business.  The CFO should create a culture where getting resources should be reasonably hard for the company.  The CFO should be pushing managers to be creative and forcing the discussion whether we should be doing certain activities and what must fall off the plate.

Every dollar spent must be a CONSCIOUS decision.

Every dollar a company spends should be thought of an INVESTMENT, not an expense.

Once your company moves to investing from expensing, then you can move from budgeting to true planning.

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Blogging on ActiveRain

Nikesh Parekh - CEO of ActiveRain
Nikesh Parekh – CEO of ActiveRain

It’s been some time since I wrote a blog post here on WordPress.  The reason hopefully is pretty obvious : since 2011, I have been the CEO of ActiveRain.com, which is the largest blogging platform and social platform in real estate.

You can find my profile at www.activerain.com/nparekh and Nikesh Parekh’s blog  here at www.activerain.com/blogs/nparekh

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ActiveRain – Largest Blogging Platform & Social Network in Real Estate

I will be blogging most actively on ActiveRain.  I may return to WordPress someday, but for now, the water is fine in the ‘Rain!

Zillow Charging for Mortgage Leads

Just saw this news today – Zillow has started to charge for mortgage leads, just like LendingTree, LowerMyBills, or the number of other companies in the space.  Zillow had entered the real estate space saying that Zillow will only charge for advertising and not enter lead generation or become part of the transaction.  The challenge is that the revenue opportunity for local advertising on a CPM basis is pretty small.  Zillow has done a great job at growing traffic to more that 10 million UU per month.  Assume that they get 20 page views per UU and a $3CPM.  That puts Zillow at a $600,00 per month in revenue or $7m in annual revenue.  The problem is that there is a finite number of in-market customers at any point.  In order to become a bigger business, Zillow needs to decide whether they go broad or deep.  i.e. Do we try to attract 20m UU who may be interested in a broader variety of home related services or go deeper with the advertising customer providing leads or becoming part of the transaction like Redfin.  Based on the below, it looks like Zillow finally decided that the market of mortgage advertisers is actually efficient and it is a bette rbusiness for them to sell leads.  Check it out.  Would be interested in hearing people thoughts.

http://blog.leadcritic.com/company-news/zillow-company-news/zillow-to-charge-for-leads