After six months of exploration since leaving Red Rover, I’ve narrowed down my list of potential new projects to one that is most exciting. For now I’ll hold off on talking about the idea, but since this is my third (maybe fourth) time ramping up a new business, my goal is to be extremely transparent in the process by reflecting on my thoughts, and actions, on this blog so you all can share in the journey with me because it’s bound to be a fun, bumpy, and exciting ride. I’m calling the series “Founder Lessons.” So let’s get started…

When Kevin and I started Swift Kick seven years ago, I naturally thought we’d split the equity ownership of the company 50/50. Kevin refused and said he would never do an equal split again after some ugliness his last company because without a clear leadership structure both legally, and through an organizational chart, it would cause too many issues down the road. Plus he didn’t believe we were both going into the new venture as equal partners. He wanted to spilt the company more along the lines of 75/25. I understood not being 50/50, but a 75/25 split seemed insane to me. What did he know that I didn’t? Turns out there was a lot I didn’t know I didn’t know. To my benefit, we ended up starting Swift Kick at 51/49, though the equity conversation came up several times again throughout the years and it kept shifting through renegotiations and ended around a 75/25 split. The renegotiations were mostly initiated due to feelings of unfairness around the equity split. But mixing feelings with negotiations creates an ugly stew, especially when it isn’t based on a foundation of tangible facts.

As I ramp up my new idea, I find myself going back over seven years of notes to see what and how we ended up determining the equity each time. In doing so, I came across a little gem that I’m calling The Starting Founders’ Equity Equation. It’s a way create a foundation of tangible facts to determine what everyone is bringing to the table to start and thus what the equity spilt should be.

Here’s a description of each element…

• Idea / Vision – If the idea / vision were a tangible pie that equaled 100, who contributed what amount to the creation and generation of the idea up until this point?
• Capital ($) – If the company needs X amount of money (in this case I’m using 100 for X) to get going, who can put in what amount of that total to start?
• Unpaid Time – In the beginning, founders exchange a paycheck for equity. If the max unpaid time someone could put in is 100, what amount of unpaid time will each person be able to put into the business in the start-up phase?
• Resources – If you listed out the resources (knowledge, skill, connections, etc) that were needed to make the business successful and the max were 100 per person. How close to 100 would each person get?

Once you’ve filled in numbers for each element, add up the totals for each founder and divide that number by the total for all the founders combined and you will get a rational way to spilt up the equity that is based on a foundation of tangible facts. In this case, if founder #1 would’ve agreed to a 33/33/33 split then eventually it would’ve come up that he/she was the only one putting money in, or that he/she was the only one with contacts, or that he/she was the only one working for free. It’s better to work through this equation now than to face the argument later and try to renegotiate.

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Update 4/21/12 – Someone created a nice little calculator that helps you figure out the equity split.

Today we had a last minute new mentor that popped into the #TechStars offices. Kevin was already gone for the day, so Dan and I led the conversation. While there was very little business value gained from the meeting because he was in a totally different industry, I gained a lot of value from being forced to talk through our idea. When Kevin and I are together in a meeting, it’s expected that he leads the conversation. He’s done it a million times and he does it well. I’ve told the Red Rover/Swift Kick story a million times too, but each time I tell it, I get better. I want to tell it more. I want to have mentor meetings where I’m leading because that’s how I get better. I don’t get better from listening all the time. And in the same breath I have a lot to learn and keeping my mouth shut and ears open is a good way to do that.

We have a lot going on right now and while some things are fires in the kitchen that need to be handled right away, other things are longer term projects that have incremental pieces that add up over time to a lot of stuff. This is where project management comes in. Set the milestones, tasks, deadlines, and resources needed, then execute. A great project manager sells..and gives piece of mind to the rest of the team. Through piece of mind comes planning ahead so it doesn’t come to a last minute crunch of sloppiness.

Kevin’s been calling me out over the past week on not giving him piece of mind on the projects I’m heading. It’s tough to hear and accept because I’ve done a lot of work both on the planning side and the “doing” side. But there is still sloppiness leaking out in my work. Each piece of sloppiness adds up over time and manifests itself as a lack of piece of mind for Kevin and the rest of the team.

It’s easy to just say I’ll make sure there won’t be any more sloppiness, but that’s a lot harder to make happen. I’m spending some time today to go back to my planning and see what I can do to better deliver that piece of mind. I suspect it’s going to revolve around prioritizing my upcoming projects better and dropping everything but the most important stuff. That includes the possibility of dropping a project or two. Right now I feel overwhelmed and I know, based on my past work, if I try and take on too much, then everything suffers.

Our main office is in Midtown, but our developers work out of office space in TriBeCa. I don’t work directly with the dev team, so I spend most of my time in Midtown with Megan. Where as Kevin and Dan work heavily with the dev team, they are in TriBeCa most of the week. The separation of our team isn’t ideal, but a necessity for the short run.

Occasionally, like today, everyone is working out of the same office and though it’s cramped, the energy is high. Even if I’m not doing something that’s uber exciting, someone else is and that causes me to ramp up. It’s also fun to be able to joke and small chat with everyone.

An office space is a reflection of the culture of the company. As the team grows over the next three months, I want to grow into a space where we can keep the energy high. Co-working spaces are great for this because you are surrounded by other entrepreneurs. If/when we get our own dedicated space, we’ve talked about the idea of creating a section for other startups just to have people around who can help us keep the energy high. 

I left my weekly meeting with Kevin today on a frustrated note. I went into the meeting with an outline of what I wanted to cover, however after an hour we hadn’t covered anything on my list.

We started the meeting recapping our respective work weeks. I had a busy week working on a plethora of things including our branding/marketing strategy and customer care timeline. But in recaping my week to Kevin I told it in such a way that it seemed like I didn’t have clear outcomes and tangible results. Based on my retelling, Kevin reacted with frustration. For the next hour we didn’t really talk about any of the stuff I planned to, but rather focused on defended myself from the frustration he was feeling. 

Normally, to plan my week I look at our project management tool (Basecamp), our CRM (Highrise), our Gantt Chart (Tom’s Planner), and our Calendar (Google Calendar). My hope is that by looking at these four areas I am blending together enough short term (fire in the kitchen) work with longer term (important, not urgent) work. At the end of the weekly planning I get an outline that looks like this…

It all sounds nice, but then I went into the meeting with Kevin and you’d think I twiddled my thumbs all week. Thus he gets frustrated and I get frustrated.

In thinking this through more I’m going to try two new approaches:

1) Turn my weekly to-dos into tangible actual goals – Last week I was working on our company principles to present at our monthly Team Huddle. On my plan for the week, I just wrote down “Principles.” If I were to go back and turn that into a tangible actual goal it would’ve been “Present Polished Version of Company Principles at Team Huddle on Friday.” That then becomes one goal for the week and I can map out what I need to do each day to make sure that happens. This way then when meeting with Kevin I can have a clear set of goals I achieved for the week verses something that just says “Principles.”

2) Better recapping - A favorite movie of mine is Big Fish. A theme of the movie is every story can be told different ways. As the storyteller, you get to choose which one you want to tell. I think how I tell what I did to Kevin is just as important as what I did. Even if I had the best week ever, if I poorly and inaccurately retell it, then I can’t expect my audience to achieve the outcome I wanted. 

Moving forward I’ll be testing my ideas out and report back soon. 

BJ Fogg created the Fogg Behavior Model (FBM) through his work at the Persuasive Technology Lab at Stanford University. The FBM states…

"Three elements must converge at the same moment for a behavior to occur: Motivation, Ability, and Trigger. When a behavior does not occur, at least one of those three elements is missing."

Fogg goes on to break down the three elements even further…

The FBM deals mostly with online software user behavior, but with a little twist, it can also apply to engaging students on campus.

Kevin, of Red Rover, created the Student Motivation Pyramid (SMP) to better understand the different student motivations. The SMP states…

"Students can be generally divided into three core engagement motivators: Comfort, Connection, and Contribution. Comfort is defined as a motivation for lowest common denominator connections on an individual level (e.g. you like sports, I like sports, let's be friends at orientation). Connection is defined as a motivation to join relevant interest groups and act together toward a common outcome (e.g. German Club, Chess Club, Magic Club). Contribution is defined as a motivation to give back to the campus by consciously leading and supporting the community (e.g. Student Leaders)."

In terms of student engagement, applying (trigger) the wrong motivation (comfort/connection/contribution) at the wrong time (ability) will have little or no effect. Such a simple sentence to write, but opens up a spider web of questions: 

• How can we know when is a good time to apply a trigger?
• How can we identify what motivates an individual student? 
• How can we know what trigger to apply? 

The good news is answers are available and technology provides the helping hand. In Part 2 I'll dig further into each question to provide an overview of how campuses can better engage their students through these models.

Fred Wilson continues to rock his MBA Monday's with a follow up to last week's post of the same title. This week, Matt Blumberg guest posts and provides some amendments to Fred's list of CEO responsibilities, as well as adding three behaviors he thinks every CEO should embrace.

First, three corollaries – one for each of the three responsibilities Fred outlines.

    •    Setting vision and strategy are key…but in order to do that, the CEO must remember the principle of NIHITO (Nothing Interesting Happens in the Office) and must spend time in-market.  Get to know competitors well.  Spend time with customers and channel partners.  Actively work industry associations.  Walk the floor at conferences.  Understand what the substitute products are (not just direct competition).

    •    Recruiting and retaining top talent are pay-to-play…but you have to go well beyond the standards and basics here.  You have to be personally involved in as much of the process as you can – it’s not about delegating it to HR.  I find that fostering all-hands engagement is a CEO-led initiative.  Regularly conduct random roundtables of 6-10 employees.  Send your Board reports to ALL (redact what you must) and make your all-hands meetings Q&A instead of status updates.  Hold a CEO Council every time you have a tough decision to make and want a cross-section of opinions.

    •    Making sure there’s enough cash in the bank keeps the lights on…but managing a handful of financial metrics in concert with each other is what really makes the engine hum.  A lot of cash with a lot of debt is a poor position to be in.  Looking at recognized revenue when you really need to focus on bookings is shortsighted.  Managing operating losses as your burn/runway proxy when you have huge looming CapEx needs is a problem.

Second, three behaviors a CEO has to embody in order to be successful – this goes beyond the job description into key competencies.

    •    Don’t be a bottleneck.  You don’t have to be an Inbox-Zero nut, but you do need to make sure you don’t have people in the company chronically waiting on you before they can take their next actions on projects.  Otherwise, you lose all the leverage you have in hiring a team.

    •    Run great meetings.  Meetings are a company’s most expensive endeavors.  10 people around a table for an hour is a lot of salary expense!  Make sure your meetings are as short as possible, as actionable as possible, and as interesting as possible.  Don’t hold a meeting when an email or 5-minute recorded message will suffice.  Don’t hold a weekly standing meeting when it can be biweekly.  Vary the tempo of your meetings to match their purpose – the same staff group can have a weekly with one agenda, a monthly with a different agenda, and a quarterly with a different agenda.

    •    Keep yourself fresh…Join a CEO peer group.  Work with an executive coach.  Read business literature (blogs, books, magazines) like mad and apply your learnings.  Exercise regularly.  Don’t neglect your family or your hobbies.  Keep the bulk of your weekends, and at least one two-week vacation each year, sacrosanct and unplugged.

Kevin and I have had some great conversations around his role as CEO. I'm not CEO, but I feel 100% responsible for making sure he, as CEO, is acting on the responsibilities outlined above, even if that means he delegates his work to me because he is slammed with other work. If you ask Kevin, he would tell you how much he'd love to just do what was listed above, but the realities of a startup get in the way. My job is to keep pushing us to be able to allow him to focus on the list above. It's what will take us from $1M to $10M and beyond.

Having only one day "in the office" before I head out again tomorrow automatically sets up some challenges as to what to focus on. The fires in the kitchen tend to need the most immediate attention. So I plowed through my emails/tasks and knocked out everything marked with "high priority, high urgency." This is a common pattern after a few days of traveling, stuff just builds up. Good news, I was quickly able to bring my inbox back down to zero in minimal time.

With a growing team, I opted to spend the rest of my time focused on them. I set Megan up with taking on the larger role of customer care by defining a map of what our current customer care looks like with some open questions for her to figure out.

Megan and I then met to talk about renewing her contract and reviewing her role within Red Rover. She's a wonderful asset to us and so much of it was verbally acknowledging the great work she is doing as well as giving her a little pay bump.

We also turned the tables by asking her to give us a review of the company. Specifically we asked her to define what she thinks the principles of the company are, what we are doing that she likes, and what we can improve on. Having the newest members of a team review the company gives as close to an outside objective observer on the inner workings of the company as you can get.

I ended my day with a trip to Pivotal Labs in Tri Beca to meet the new programmers working on Red Rover as well as have dinner with Kevin to talk about several things. Every time Kevin and I meet, we have a fairly long list of topics to cover, but time never seems to be our friend as we plow through several pieces quickly to keep time integrity with other appointments. We both know the importance of prioritizing the "high priority, low urgency" tasks, but haven't put it into practice lately. We'll get better.

Lastly, on a totally unrelated note, my brother (Daniel) called last night to announce that he and his girlfriend (Andrea) were getting married today! It's kinda sorta a 9 year in the making non-pregnancy related shotgun wedding. It makes total sense for health and financial reasons, so Annie and I popped out the shot glasses and toasted them with some VeeV. It sounds like there will probably be a more official gathering soon to celebrate their nuptials, so I'll hold my emotional congrats till then. But for now, CHEERS!

And so ends 08/26/10