Mar 27

Having a life

Ed Zimmerman writes in the WSJ this week that founders have to choose between having a startup and having a life.  Ed sees a lot of startups, and his perspective is valid.  Unfortunately, if you observe most founders (successful and unsuccessful alike) its all to easy to come to this conclusion.  It doesn’t have to be this way.  It is possible to have a startup and have a life, it just requires something very difficult for all of us…balancing our dedication to our startup with some discipline.

When I started Right Media, I had a bit of an unusual set of circumstances for a startup founder.  I was 26 and had 2 young children (and a 3rd arrived not too soon after).  I was also commuting from Long Island to  NYC at the time.  If I was going to be successful as a founder AND husband and father, I had to find a way to make all that work.  I wasn’t willing to fail at business OR at life.  Here are a few things that make balancing life and a startup really hard, and how I dealt with them:

-  We have perpetuated the myth of the one dimensional founder.  So much so, that we attach a stigma to having a life outside the startup.  We say things like “Wait a minute, startup founders don’t take family vacations!” when someone takes a vacation.  We say it half in jest, but the other half hits home too.  We love to tell the stories about the all nighters, the redeyes, the family events we spent on the phone, or just couldn’t make.  Its true.  Sometimes we need to make those sacrifices…but we don’t need to do them ALL the time, and we don’t have to be so damn proud of them.  Let’s hear more of the stories about taking a couple days and unplugging and the world not crumbling around our feet.  That happens too, and it’s really eye opening when you realize most of the time things can go on without you at your startup.

-  We think we can work all the time and be productive.  We can’t.  I remember lots of evenings in the first Right Media office (ok, it was more like a closet), staring somewhat blankly at my screen willing something important to happen, or trying to draft an articulate product specification.  After 10 or so hours in the office, my brain just wasn’t working that well anymore.  I could have sat there for hours, but I had worked myself out of a productive state.  The best thing for me to do was get out of there, try to get home and put the kids in bed, eat something real for dinner, spend a little time with Michelle. 

-  We allow ourselves to be consumed by our ideas.  Passion is an absolute requirement for startups.  Unfortunately, it is way too easy to overcook the passion thing and become totally one dimensional.  When this happens, your relationships suffer and you can find yourself isolated.  Ever try to talk to a teenager who’s been playing Halo for 6 hours straight?  Don’t let yourself get into that state - its not good for anyone.

-  This idea that investors want you to kill yourself and destroy your relationships working on your startup is total bullshit.   Making good decisions requires some level of perspective.  Your investors have just turned over millions of dollars to your care.  You will make decisions every day that will define whether that money evaporates or grows in value.  Do you really think your investors want you making those decisions stressed out, sleep deprived and over-caffeinated?  Not if they are smart.

-  We founders create the cult of one dimensionality, and we can change it.  When we work all the time and do nothing else, we send a message that we expect everyone to work all the time.  This kind of culture is dangerous.  Don’t be one dimensional, and don’t let your company develop this culture.  Work your ass off - but do something else too.

Don’t buy into this mythology that startups don’t work unless you play the obsessed, willing to throw everything else away for your startup, founder.  The fact is, if you have a good idea, a good market, and you build a great team, and you create some balance in your life - not only will your startup perform, but you’ll be happier during the process.  If you’re a startup founder and you don’t have a life - get one.  Have a relationship, get a hobby, volunteer, read a book, get some exercise.  Doing something besides your startup will make you a better founder, and a better person to be around.

Startups are hard as hell, but with some discipline, you can have a life even while you’re building yours.

Oct 22

why do smart people get dumb about exec pay packages?

It is being widely reported today that Yahoo’s new COO has been granted a pay package worth 62M over 4 years.  I don’t know him, and I don’t have an opinion about whether or not he is worth what is under any circumstances a very rich package.

What is bugging me today is how poorly executive compensation is being reported on by journalists who are clearly smart enough to know better.  This has always kind of bugged me.    Very smart reporters who MUST understand the difference between guaranteed compensation and incentive compensation consistently gloss over the difference.  

Here, in plain english is what Yahoo is paying DeCastro:

-  600k per year in salary (pretty standard for a c-level exec in this industry and a company Y’s size)

-  540k per year in target bonus (also pretty standard)

-  1 million dollars in cash as a sign on bonus (they call it a make up grant).  He loses this if he doesn’t stay 6 months, which is unlikely.

-  20M of restricted stock (RSUs), vesting monthly over 4 years.  The value of this at today’s stock price is 5M per year.  if the stock price moves up, it could be more.  if it moves down it could be less.

-  18M of restricted stock that vests 25% on his 1 year anniversary and 1/36th for each month thereafter to his 4 year anniversary.  This is worth 4.5M per year, and like the RSU’s above could be worth more or less based on movement in Yahoo’s stock price.

-  18M of stock options, vesting 25% on his 1 year anniversary and 1/36th for each month thereafter to his 4 year anniversary.  This is NOT worth 4.5M per year as most reporting on the subject might suggest.  With stock options, the value will only be the appreciation in the value of each share above the current stock price.  The easiest way to think of this is as a % appreciation.  If the stock goes up 50%, then the grant is worth 50% of the value (or 9M dollars).  In order for the grant to be worth 18M, the stock has to double.  In this scenario, if he’s doing a good job, the company will not begrudge paying him this. 

To further break it down, here’s what the numbers look like if you assume Yahoo’s stock stays flat, he earns 100% of his bonus and the executive quits:

Stays more than 6 months but less than 1 year:  Total pay is pro-rata portion of 600k salary and 540k bonus (not guaranteed), 1M signing bonus.  Total value is between 1.5 and 2.1M

Stays 1 year:  600k+540k+1M+9.5M of RSU value+$0 of stock option value = total of just over 11.5M

Stays 2 years:  (600k+540k)x2+1M+18M of RSU value+$0 of stock option value = total around 21M

Stays 3 years:  (600k+540k)x3+1M+27M of RSU value+$0 of stock option value = total around 31M

Stays 4 years:  (600k+540k)x4+1M+36M of RSU value+$0 of stock option value = total around 41M

Is it a rich pay package.  Hell yes.  Does it come close to guaranteeing 62M as much of the reporting on the package suggests?  Hell no.

I think most of the reporters who cover this industry are smart enough to figure this out.  After all I just did it in 5 minutes from a single SEC filing.  If folks want to be outraged about executive pay - go for it…just please be informed about what you are talking about, and a little less lazy in the reporting around this subject.

Jul 16

Yahoo Still Tilting at Windmills?

I don’t personally know Marissa Mayer, but over the years I have heard nothing but great praise from people who’s opinions I trust.  I have heard she’s a great leader, excellent product chops and extremely smart.  She’s clearly ambitious and driven, and I wish her well in her new role.  I have long rooted for Yahoo to turn around its fortunes, and I would be thrilled if this was the spark the company needs.

But…I’m not buying it.  Here’s what I struggle with:

-  I think the idea that Yahoo was ever a “truly great technological innovator” is a myth.  Yahoo’s strength has always been its audience and media assets, not its great technology.

-  Their last 2 CEO’s have been “product leaders” who could “help return the company to its roots of product development and technical innovation”.  

It hasn’t worked.  The more Yahoo tries to fight Google, Facebook and the like on front lines of product/technology innovation, the more they play into their opponents strength and the further behind they fall.  Yahoo has been tilting at windmills trying to fight Google for more than 10 years and the results are clear.

A CEO who understands the media opportunity, and understands that in the world of media “good enough” is good enough when it comes to technology, feels like the right leader for Yahoo.  That’s what Ross Levinsohn (and his plan) felt like to me, and I think it was going to work.  Was it going to create a 200B market cap company fueled by dramatic product innovation?  I doubt it.  But If you want to build that company, you would be better off doing it from scratch.

Will Marissa Mayer, who has come of age in the culture of Google understand that Yahoo truly is a media company at its core?  Will she recognize that the “history of technical excellence at Yahoo” is a myth?  Will she see that going toe-to-toe with Google and Facebook for tech talent is a losing proposition?  Will she settle for “good enough” when it comes to technology to drive the company’s growth?  I just don’t see it.  I think she will try to do what Yahoo has been trying to do for years - beat Google (and now Facebook) at a game Yahoo can’t reasonably expect to win.

May 13


May 11

I am not actually 6 foot 7

i was once at a conference talking to Bill Gurley.  He’s very tall.  Someone who worked for me at the time said to someone else - “look, Mike is talking to Bill Gurley.”  That person thought the tall guy was me, and Bill Gurley was the shorter guy.  

I thought it would be rude to correct this person and might embarrass them, so I chose to say nothing.  Apparently this person has been talking about my height for several years now, and it has slipped into the public record that I am very tall. 

I’d like to apologize to Bill Gurley for any distraction this may have caused him over the years.  I’d also like to apologize for the behavior of the underlings who are responsible for the public’s perception of me.  Unfortunately, I can’t take any personal responsibility for this misconception because it would be terribly embarrassing to do so and might effect my livelihood and self esteem.

In very honest moments, I admit (only to myself) that I liked that people thought I was 6 foot 7.

For those who have no idea what i’m rambling about, it is this:

We need the digital equivalent of chris berman’s “C’MON MAN” segment on ESPN.  I nominate Mike Arrington and Chris Dixon to do the show.

May 07


Mar 25

self importance in founders

I guess I knew there was a possibility that my last post about the Yahoo tech stack would draw some attention.  It was nice to get that stuff off my chest, and really nice to reconnect with some people I haven’t talked to in a while.  Most of the feedback I got was pretty positive.  But the most interesting thing about the negative feedback I got was that it wasn’t directed at the content of the post, but rather the way I wrote it.  The best example is a comment from Business Insider’s republishing of the post:

Wow, what an arrogant sh$t-talker. He’s got some points, but the self importance really kills this…”

I guess it would be cooler to pretend I didn’t read the comments, but of course I did.  I thought about it a bit and maybe they have a point.  I was trying to avoid sounding too arrogant in the post, but I guess there is a certain self importance to publishing my opinions on the whole thing.

Some fine individual defended me in response:

"To the person talking about self importance - you have to have some when you have built a billion dollar company."

I think they have a point too.  Enough of a point that it made me want to write another post, about the critical importance of a certain degree of arrogance in founder/CEO’s.

When I invest in an early stage company I am looking for a certain arrogance from the founder.  Not a crippling arrogance, not an “I won’t listen to alternative point of views” type…but a good solid foundation of “I think I know what the heck I’m talking about and I’m going to stick to it even in the face of a lot of resistance.”

When I was starting Right Media, popular opinion was that ad exchanges had been tried and had failed and that this attempt would fail as well.  I, and other like minded people on the Right Media team chose to go ahead anyway, because we thought we knew something everyone else didn’t.  We thought our alternative vision of the world was better than what existed.  We thought we were right and the naysayers (most people) were wrong.  We felt our opinions were more IMPORTANT than the opinions than others.  Self importance.

I have trouble thinking of a successful entrepreneur who doesn’t possess a certain self-importance.  

We’ve all seen it in the more public figures:

Bill Gates, Steve Jobs, Mark Zuckerberg, Page and Brin, Ellison, Benioff, Cuban, Sorrell, Andreeson, Horowitz, Pincus, Branson, and on and on.  Can you name a successful founder CEO who isn’t a little bit (or maybe a lot) self-important?  

The irony is that this trait manifests most clearly BEFORE we’ve been proven right:

Was Zuckerberg perceived as more arrogant when he turned down 1B from Yahoo while Facebook was in its infancy, or today when he’s about to take it public for close to 100B?

Was Jobs more arrogant when he was fired from Apple, or when it became the most valuable company in the world?  (ok, maybe this one’s a toss up.)

Chances are you know founders who aren’t household names who share this characteristic.  I know a bunch.  They’re the leaders of the most successful, most disruptive and highest potential companies I know of.  They are the leaders of the next generation of companies that will change the world we live in.  And every single one of them has a level of self importance.  Without it, they will not succeed.  They will waffle.  They will bow to public opinion. They will seek consensus in the face of difficult decisions.  They will fear failure and accountability in a way that is devastating, and paralyzing.  There are moments in every founder’s life when they have to decide what’s more important, their own judgement or other’s, and while they may not always be right, the best of them will usually go with their gut.

I don’t know what is more self important that that.

I’m not saying we should be excused for being arrogant assholes (as we sometimes are).  Sometimes we will be wrong, and we’re not usually wired to handle that well.  We will learn tough lessons, humility, and hopefully we will emerge from that a little softer around the edges, a little less abrasive.  But in the end, I will continue to encourage other founders to retain enough of that self importance to keep believing they can change the world.

Mar 21

heatheraaron said: So do you think that the right type of buyer even exists?

i think the right buyer has a lot of cash (at least several hundred million) they are willing to spend on taking control of the assets and R&D, and really wants to make sure there is a competitive alternative in the market to Google.  Would make microsoft the natural buyer, but not sure they really want into this game or have the confidence they can build the ad platform of the future.

Mar 20

Who asked me, anyway?

I keep hearing that Yahoo is going to sell Right Media and Apt and their whole technology stack, in order to reduce the costs associated with their ad business.  This isn’t surprising, it was often discussed when I was at the company and I’ve heard it has been a constant question in the years since I left.  

What does surprise me a bit, is that no one looking at buying or selling the assets has asked me what I think of the idea.  I mean there’s no reason why anyone has to ask me.  But I just can’t help thinking I have some insight to offer spending 5 years envisioning the ad exchange model and ecosystem, building Right Media from scratch and almost 3 more trying to integrate the Yahoo technology stack with Right Media into the unified tech platform for premium and non-premium advertising.

A lot of people have assumed that I would be right in the middle of these discussions, perhaps even trying to buy the business back myself.  I have to admit, I’ve given it some thought and found the idea momentarily captivating.  Some kind of twisted online advertising version of a heroic return to the battlefield I abandoned sometime in late 2009.  But in reality, my focus is elsewhere and this is someone else’s batte to fight.

Anyway, since no one is asking, I offer my insight free of charge.  And I absolutely guarantee it is worth at least as much as it costs.

Here’s the simple version of why it makes sense for Yahoo to sell these assets:

 -  Yahoo needs to unload the complex tangle of advertising technology used to run its business in order to save money and focus the company’s resources on investments that are more core to future growth. 

-  Yahoo has proven unable to be a leader and disruptor in the ad technology area.  For example, Right Media has languished, APT has been a failure, Yahoo’s legacy ad systems are extremely outdated and expensive to maintain.

-  There are partners out there who are better suited to building enterprise SaaS systems like the one Yahoo sorely needs to run its ad business.

And a simple version of why it makes sense for someone to buy these assets:

-  Many companies (including Yahoo, although not very effectively) are competing to give Google a run for its money in the “advertising platform/exchange” marketplace.  For any of these companies, to have Yahoo’s ad business run on their platform would give them a genuine shot to compete with Google.

-  There are hundreds of companies building applications for digital advertising, creating an alarming array of 3 letter acronyms (DSP, SSP, DMP, etc.) and singlehandedly keeping a small army of PowerPoint jockeys employed updating the infamous advertising landscape slides, but very few companies are genuinely going after a reimagined full tech stack for advertising.

-  Yahoo has a large group of advertising product and technology experts who could be a game changer for a company looking to build the ad-tech stack of the future

I generally agree with the arguments above. Well, not the last one, but I’ll get to that. The issue is that like most M&A logic, it grossly under-simplifies the challenges with a deal like this.  Before I discuss the complications, I need to express a key personal opinion that my entire argument hinges on:

In order to build a truly disruptive and highly valuable company delivering enterprise software for digital advertising, the new solution has to be an order of magnitude better than the existing systems.  It is not enough to deliver an incrementally better version of the existing systems (primarily doubleclick and homegrown technologies).  If there is to be a resurgent disruptor in the advertising technology space it has to change the game.  It must attack the white space, and it must do what GOOG/DCLK, Yahoo/RM etc. have been unable to do.  Further, the key white space here is a UNIFIED exchange for PREMIUM/N0N-PREMIUM advertising space.   No one is actually close to delivering this, and no one will beat Google/DCLK in this space without this.

If you disagree with this core premise, there’s really no reason to keep reading.  We can agree to disagree.

Ok, if you’re still reading, here are some of the problems with the intersection of my core premise and the assumed logic of this deal:

-  Building the Unified Premium/Non-Premium exchange will involve building the system from scratch.  Yahoo’s legacy technology is not architected for this, nor is Right Media, nor is APT, nor do I believe there is another system available in the market today that wouldn’t need to be rebuilt.  This is a total build from scratch situation.

-  Therefore, if you are thinking about buying Yahoo’s assets, you are (hopefully) not doing it because you intend to repurpose these assets to build the system of the future.  You are buying useless assets which you must buy in order to get the Yahoo business, which is the key customer you will architect your solution around. 

-  The buyer of these assets will have to migrate, maintain and ultimately decommission the existing tech stack, at the same time they are building the new platform.  We tried to do this at Yahoo, and we failed.  We failed for a lot of reasons, but the primary is that some teams are good at cobbling together existing stuff, and some are good at building brand new stuff, but rarely can a team do both.  Never was that more apparent to me than when trying to integrate Right Media and Yahoo product and engineering teams.  Whoever buys this asset will have to do both, or at least recognize you need 2 distinct teams to do each.

-   If you are buying the Yahoo ad-tech stack, the thing you really care about is the Yahoo customer relationship.  Yahoo has had a tough few years.  But getting them as a lighthouse customer of the future platform is a game changer, and that’s what you really want. 

-  The Yahoo tech stack is a liability, not an asset.  As the “buyer” your best bet would be to leave the assets in place and pay for the resources to maintain the current stack at Yahoo, and fund a totally separate team to build the new platform (with Yahoo’s firm contractual commitment to use your platform once it’s done).  This enables Yahoo to cut costs near term, and offset the significant R&D cost of building the right platform to someone else, while holding out hope that they get a better system to run their business down the road.

-   Speaking of cost savings, Yahoo is not going to save a lot of money in the long term on ad technology expense.  Sure, with the right buyer, they can save some money near term, but the reason why a buyer would buy the Yahoo customer relationship (that is much more what is for sale here than any tech assets) is to be able to charge Yahoo and others for a game changing platform down the line.  There is not any real opportunity for Yahoo to get rid of their tech expense.  That’s like saying you are going to sell your car to avoid the car payment and maintenance expense and just use rental cars to save money.

-  This idea that Yahoo would just stop using its own advertising technology and save money seems far fetched.  What would they run their multi-billion dollar business on?  Doubleclick’s stack?  I’m sure the feds will love that one.

-  The idea that Yahoo has a force of brilliant advertising product manager and engineers that are going to accomplish this objective is not plausible.  Yes, there are smart people there, but they are not the people to build the platform of the future.  How do I know?  They were given the last 5 years to do it.   Wouldn’t the right people have accomplished the objective already?

-   Capital.  This takes a lot of money.  You have to buy out the assets (or at least pay yahoo to keep the existing systems running) in order to give Yahoo the much talked about cost-savings.  Then, you have to make the R&D investment required to build the system of the future in parallel.  Once you’ve accomplished that, all you have to do is defeat Google/DCLK  in a sales war where they hold the high ground, and can pretty much price you out of the market.  Not that you can’t win a fight like that, but without the order of magnitude better system I describe in my core premise…good luck.

Do I know everything about the situation?  Not by a long shot.  Do I know more than most?  Probably.

Why write this?  I’m not even really sure.  Probably has to do with giving 8 years of your life to something and knowing you came up short.  The reality is that I’d like to see someone pull it off.  The same way I like to see world records, perfect scores and amazing feats of strategy and engineering.  Or maybe its just because hard earned insight should be shared.  I hope this is of some use to some of the people considering the transaction.

Mar 16

the “truth” about startups?

Business Insider features a very dark view of what it does to your life to build a startup.  Everyone has their own experience, and is entitled to their opinion.  I’ve been involved in some way with hundreds of startups, and they are hard…very hard at times, but I’ve never seen anything like this (even in the failures).

To the anonymous author of this post (and anyone else who feels this way):  If this is what startup life feels like to you, I would suggest you re-evaluate your career choices.

Failure isn’t this ugly.  Holding on way too long to something that’s not working might be.