Blake Borgeson, in blog form

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Posts Tagged ‘fredwilson

umair to business: be sustainable

with 3 comments

Whenever Umair Haque, whom I’ve blogged about here before, saves up some thoughts and posts them and titles them a manifesto, people take notice these.  There’s Fred Wilson’s post from a couple days ago promising to really digest the suggestions; there’s Michael Lewkowitz, whom I didn’t know until today, and who sounds like a sharp vc up in Canada; there’s me, writing this post.  Hey, I count.

I didn’t plan on writing two posts about this, but there was so much to think about once I got into the topic that splitting up the two big questions Umair brings up seemed like the smart thing to do.

I’ll get right to the point.  Here’s another link to Umair’s post, if you’d like to read it first: A Manifesto for the Next Industrial Revolution.  The end of his post gets into suggestions for big sustainable opportunities to pursue, which goes beyond what I think I can talk about in a single post.  This post is about how an existing business can think about sustainability.

How can Businesses Make the World Better?

This question assumes, as Umair strongly believes, that economic progress doesn’t appear to be lining up with improving welfare and prosperity for everyone, as many of us have either hoped or assumed (or for cynics, doubted) it would.

The world is getting phenomenally richer – but the costs of that wealth seem to be endemic poverty for vast swathes of the world’s population, the poisoning of the water we drink, the pollution of the air we breathe, and the fraying of the social and cultural fabric that binds us together.

I agree with him regarding many aspects, (including allocating environmental costs), but regardless I don’t feel like you have to agree 100% with the above statement to appreciate a discussion of how to improve a system that could clearly stand some rethinking.

Restructure your Thinking around Sustainability

The first way to make the world better is a DNA (philosophy, mindset, fundamental strategy in Umair’s vocabulary) shift to sustainability–not just environmental, but people sustainability and market sustainability as well.  Umair says below that technology alone will not achieve a sustainable economy, and I’ll give him that, though as he admits, technological advancement will continue to play a critical role making the world better.  He just calls the DNA shift harder, and he may be right, since it’s a departure from the present course of most businesses.

Even if we invent a magic energy or food source tomorrow, it does the world little good if it’s in the hands of a Bill Gates 2.0 – the amount of new value that’s created is minimized. Conversely, it also does us little good if it’s in the hands of a Ford 2.0, who’ll just push-market next-generation gas guzzlers that put us squarely back into an energy trap.

The real problem is that the industrial economy is riddled with incentives to rip your head off, sell you lemons, maximize so-called “profit” at all costs, and exert power against you – not for you. That’s why it seems that pain, suffering, and value destruction are deeply embedded in the very DNA of our rusting, industrial-era economic system itself.

And that means that though technology is necessary, it’s not sufficient. What’s harder – and what truly unlocks new value – is new DNA. The fundamental question new DNA must answer is this: how do we organize and manage resources so they’re not depleted, crushed, strip-mined, and slashed-and-burned?

We need company and organizational DNA to get reinvented with a long-term view towards creating sustainable businesses and a sustainable world.  For a terrific perspective on that idea, Yvon Choinard’s book about starting and running one of the most sustainable companies out there (patagonia) really opens your eyes to what kind of a shift in mindset Umair is talking about.

Why be Sustainable?  Is it a Moral Imperative?

One reason to go the sustainable route is if you believe it’s a moral imperative–that it’s actually unethical for a business to operate knowingly in a way that is not sustainable, even if it’s legal.  However, as one of the commenters on Umair’s post points out, I think it’s going to be difficult for businesses to come together to agree with that until a new generation of business leaders, raised with all this talk of sustainability, takes hold.  That means you’re putting yourself at a competitive disadvantage by being sustainable, which means that, until the government steps in and regulates industries across the board, allocating environmental and social costs more effectively, sustainable companies are going to be on the down-and-out.

Should businesses sacrifice themselves for the ethical opinions of its leaders, even when not asked by the law? That’s a tough question for a private company.  As for public companies, in the US, leaders get taken to court for acting counter to the interests of shareholders.  To me, this means that the moral imperative is instead for both companies and individuals to push our government to reform the regulatory environment as quickly as possible, towards more effectively lining up with the realities of life on earth as we understand them now.

Long-term competitive advantage.

So how should business leaders, investors, and entrepreneurs see sustainability in our current business environment?  As a source of long term competitive advantage.  Work with politicians, if possible, to help them understand the costs and concerns associated with your business that aren’t accounted for in today’s regulatory environment.  Educate customers as to what needs fixing in your industry, what you’re doing about it, and how they can help, by voting at the ballot and with their purchasing decisions.

And think long-term.  Allocate costs correctly yourself in preparation for the day, hopefully not too long in coming, when the regulators force companies to do so.  Brag about it to your customers.  When you know where the business environment is headed, you can swim with the current instead of against it, and prepare yourself to be at an advantage when things settle out.

What does this have to do with most companies?

Loads of companies, especially in the internet space, can remain blissfully ignorant of greenhouse gases, global warming, and starving people elsewhere in the world with no consequences.  What should these companies and entrepreneurs make of all this talk about sustainability?

I think sustainability in the broader sense, beyond the environmental sustainability most people discuss, is about being honest about what you know–with yourself, your employees, and your customers.

Here are a few standard dishonest tactics:

  • manipulation (hiding important facts for your benefit)
  • bait and switch (say, introducing a new opt-out advertising mechanism without warning, like beacon into facebook)
  • push marketing a product that you know destroys wealth or value in the long run (umair’s ford 2.0 example, though I know too little about ford’s history to point a finger specifically at them)

If you wouldn’t be comfortable explaining to an audience of friends and family why you made the strategic decision you did, to me that’s not a sustainable strategy.  To agree with that, you have to believe that in the end, the truth will out, and that trust matters.  This broader view of sustainability loops back into my previous post about employing “be good” as part of your company strategy.

In my next post I’ll look at the second big question Umair discusses: How should we go about solving the world’s big problems?  I’ve been thinking about it a lot recently, so it should be interesting to try to put into words.

Please comment if you like.

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Written by blakeweb

June 25, 2008 at 5:17 pm

fred wilson’s outstanding “new path to liquidity” discussion

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There’s an incredibly educational discussion in the comments of a blog post a couple of weeks ago over at Fred Wilson’s avc. I’m a little late to the party, I know, but that’s because it took some thinking and reading on it for the idea to sink in and resonate with me, which is often the case with ideas that really get in there and change how I think about something.

The main point is that some things about the startup/vc world are pretty broken, and a secondary market for shares in private companies is an interesting approach to fixing them that Fred brings up for discussion. Right now, vcs operate with some stringent constraints on how they can invest and what returns they need to see in what timeframe–see Marc Andreessen’s first post about vcs here for a good rundown. The paths to generating a sufficient return to the investors in new companies within the first few years are 1) to grow the company large enough to sell off part of the company in an IPO, which is hard and uncommon, especially when the public markets are taking a beating, like now, and which also legally requires the company to jump through all kinds of crazy hoops to guarantee regular citizens have the information they need to make an informed decision to invest in the company; or 2) to sell the entire company to an acquirer, usually private equity or a big company like Google or Microsoft in the tech world. So really, the main way right now for the initial investors and founders to not only get money but also retain ownership is IPO, which is operationally challenging, and next to impossible when the market for it is like it is right now. So what ends up happening instead is that the company gets bought, the founders and investors get paid, and the acquiring company usually doesn’t care quite as much about the bright future the company had as it does about integrating the technology, the users, and the technical team into its operations.

So it seems like one way to solve this quandary is to let new investors come in and buy a chunk of the company. The original vcs get paid a good chunk, so their investors are happy. The founders get paid a good chunk, and also retain ownership in the company, keeping them very vested in its future. The new investor gets the chance to buy stock, basically, in an incredibly awesome startup before anyone else, because it really understands the market and is willing to do its homework to make sure it’s a smart investment. Rather than getting rolled up into a big company, the startup remains independent and has the chance to continue to pursue the market-changing or world-changing long-term vision its founders had when they started it in the first place (at least I’d wager they had a pretty good vision, if the company did as well as we’re talking here).

So here’s Fred’s blog post again where all the discussions take place, and that discussion in and of itself is extremely educational. If you want to see how a really great vc, both performance-wise and mentality-wise, thinks about his job, scan down the page and read Fred’s comments and the surrounding discussions.

And here’s a link to the short version: a video interview Fred gave a couple days after the blog post briefly outlining the idea.

Written by blakeweb

April 25, 2008 at 1:33 pm

Posted in startups

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Fred Wilson on startups in the downturn: batten down the hatches

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Fred Wilson, partner at Union Square Ventures, backer of Twitter et al, speaking mostly about the venture-backed startup world, examines some quotes from vcs floating around in the news concerning the effects of the current economic downturn. It’s clear that they’re taking it pretty seriously, even for innovative internet startups. To quote him,

in my mind, the single most important thing is not revenue in a time
like this. The most important thing is cost structure. Thomas Cole says
“smart companies are battening down the hatches”. That’s right.

I think it’s worth digesting all those comments, especially if you’re running a startup, and especially if that startup is bootstrapped. A downturn isn’t the time to throw in the towel for a bootstrapper. In fact, it can be a great time to start a company–the big guys are cinching up for the cold winter, which gives you some time to get in there and figure out the market first. It just makes you stay leaner, which means in the end you could emerge as a stronger, more efficient, and more profitable company. You just have to make it through the rough patch to see the sun on the other side.

Written by blakeweb

April 2, 2008 at 10:45 pm

Posted in startups

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