Personally getting an MBA was one of the best investments I ever made. My MBA enabled me to understand at a very deep level business in general, finance, and marketing. When I joined a startup that went into hyper growth mode I was able to apply this theoretical learning and build upon it in a very practical way.
"For venture capitalists who pray at the altar of pattern recognition, it would be hard to ignore how few massive tech successes have been founded by entrepreneurs with MBAs on their resumes."
The first two startups that I joined were founded by MBAs. Both had successful exits. One a billion dollar market cap public company. The other a $275 million acquisition. The above quote did not align with my personal experience. It appeared biased to me.
So I went digging around. A good place to start was the Harvard Hurt article itself. To quote:
"It’s possible to turn to research conducted by Aileen Lee for her viral list of ‘unicorns' – slang for the 39 tech companies founded since 2003 valued at $1 billion or more by private or public markets. Only 12 of those 39 companies had co-founders with MBAs..."
Only 12 of 39? That's 30%. I don't know how many MBAs there are in the USA but it is no where close to 30% of the general population. The degree is over indexed in the sample set. Seemed like a positive pattern.
So I decided to do a little more analysis closer to home. I went through Paul Judge's recent list of most valuable or promising startups in Atlanta. There are 25 companies on that list. I looked at the educational background of the current CEOs of these companies using simple internet searches and LinkedIn.
I was not able to ascertain the educational background of three of the CEOs (at least one is a college dropout). Of the twenty two that remained nine have a masters degree in business and fourteen do not. Or but another way, 41% of the CEOs from the list of the most promising startups in Atlanta have a graduate business degree. There was no other degree held by this group of CEOs that was even close to this percentage. I was somewhat surprised to see that science and technology grads only account for six (27%) of the CEOs. There were four that have undergrad business degrees (bringing the total that studied business to nearly 60% of the total), two liberal arts majors, and one that studied law.
While MBAs are not for everyone (I have advised many proteges to skip the degree and get their learnings in more practical and potentially lucrative endeavors), a good percentage of the people that run high potential startups have the degree. Getting an MBA may not be stupid at all. It's fine. Just don't be an MBA. What matters is what you do with the degree. That is what will earn you street cred.
So two of the largest advertising giants, Omnicom and Publicis are getting together to form a company with $23 billion in revenue to fight off the inroads from digital competition. Might be a losing battle, data based marketing is growing fast.
A long time ago I was involved with a merger of equals. EarthLink and MindSpring. A guy named Stan worked for me at MindSpring. He led our retail distribution effort. Shortly after the deal closed Stan got on a plane to meet his EarthLink counterpart. After his meeting he called me from LAX. "Lance, I'm outta here, I resign." Stan then proceeded to tell me this, and I am of course paraphrasing.
"I was involved with the merger of Babbage's Inc. and Software Etc. Never again. One merger of equals is all anyone should go through in their lifetime. What you guys should do is go to a football stadium, get all the EarthLink employees on one side and all the MindSpring employees on the other side, and get your leaders at the center of the field. Flip a coin. Winners stay and run the company, losers go home."
Stan quit. Could not talk him out of it.
As for my experience in a merger of equals I have to say that perhaps Stan and The WSJ are right. Mergers of equals have a unique set of challenges. In my mind it's better when one company acquires the other. At least that way everyone knows who is in charge.
One of the top five classes I have ever taken was a shortened version of a negotiation course during a Mergers and Acquisitions executive education program at The Wharton School. The class was led by Stuart Diamond. It was darn good.
It has been over ten years since I have taken that class. But there is one thing that I will always remember from it. If you can't seem to get anywhere in a negotiation take an extreme position that any rational person would agree to. Get to that first yes.
An example that Mr. Diamond used was around the Israel-Palestine conflict. Pretty tough nut. Those folks can't seem to agree on anything. In such a situation you have to take an extreme position to get agreement.
"Can we agree that it is wrong to kill babies." Well yeah. From there take incremental steps, "How about toddlers?" "First graders?" "Teenagers?" until you meet a point of resistance. At that point get them to tell you more so you can address the underlying concern. Ask why.
Great tactic that generally works. Take an extreme position, it will often times lead to a deal.
"If we have data, let’s look at data. If all we have are opinions, let’s go with mine."
Seems like the right approach for anyone running a company to take. It is the approach that I have seen most of the CEOs that I work for take. Sometimes they believe in the data, sometimes they do not. If you are working for somebody that is running a company you only have one course of action.
"Dealster marks the first acquisition for Half Off Depot. In addition to its membership base, Dealster’s value to Half Off Depot lies in its proprietary platform, which includes social elements for customers and merchants as well as other features currently on the Half Off Depot product roadmap."
The key word being first.
One of the big outcomes of Groupon mishandling its IPO process was that the financial community lost interest in the entire online deal space. As I wrote at the time, "(the) Groupon IPO is good for Half Off Depot as it will make it harder for smaller underfunded companies to remain viable and they validated the market in which we participate."
At Half Off Depot we decided we needed to do two things.
The first was to get cash flow positive. We did this back in March and can continue to operate the business with a healthy bottom line while still growing at a nice pace.
The second was to go out and find smaller companies whose access to capital has been cut off but need more money to survive. Dealster was one of these companies. There are lots of companies like Dealster and I am spending lots of time talking to them. I believe that Half Off Depot will be able to efficiently grow its member base, and in turn revenues via acquisitions. We are going down that path. It will be interesting to see where it leads.
So a long time ago at a place about a mile away I worked at this little startup called MindSpring. MindSpring was kinda like Zappo's before Zappo's was just a gleam in Tony Hsieh's eye. The company was completely core values based. To cite one of them, we were customer driven. We also had something we called the 14 deadly sins. Number 2, rely on outside vendors who let us down.
What held true then holds true now.
At Half Off Depot we had a vendor named Digital Doorstep, or DDS as they are known in the industry. DDS was good for revenue but bad for business. Since October they have been consistently the number one source of customer service calls. Boatloads of refunds. No communication. And despite what they claim in their public Chapter 7 bankruptcy notice, they left a lot of number of online deal companies holding the bag.
If a vendor disappoints you early cut them quick. Don't rely on outside vendors who let you down.
I get the question every week, perhaps at least once a day. "What do you think of the Groupon IPO? That's good for you guys, right?"
To which I reply a hearty "maybe."
For those of you that have no idea what I am talking about Groupon, the biggest competitor to Half Off Depot where I currently work, went public on November 4. Groupon raised $700 million at a $12 billion valuation. That sandwiches it right between Google and Webvan as the largest IPOs in term of valuation. Interesting company to keep. I considered the Groupon IPO pricing to be a little expensive. Unlike Amazon, a much lower initial value company where I made a nice penny, I wouldn't touch it.
What do I know. The stock was priced at $20, and rose 31% on it's first day. Since then it's been in a slow drift downward. I expect that trend to continue for some time until it gets below the offer price. None of that will stop a bunch of 20 somethings celebrating the end of the lockup period at Kincade's, Sheffield's or wherever 20 somethings go to party in Chicago these days.
But back to the question is it good for Half Off Depot.
One of the things about running through the IPO process is that it generates a lot of general mass media attention. Most of the attention about Groupon was negative. Merchants don't like deals, there is no way Groupon makes money, management is blundering the IPO process. This created a generally negative sentiment around the deal space, one that is going to take a little time to overcome. We have time. And money. A lot of companies do not. They are going to go away soon. Less competition is good for Half Off Depot.
The Groupon IPO also demonstrated that investors see value in the deal space. The mishandling of the IPO process is a little problematic. Groupon got through it, they got out. But along the way questions were asked by investors that have yet to be answered. Until those questions are answered it is going to be difficult for other companies in the space to raise additional capital. Those that do are going to have to be able to clearly articulate why they are different and have a demonstrable money making model with some leverage. If Half Off Depot can do the former and show the latter, and I think we can, the Groupon IPO validated a market where we can play. Having a validated market to participate is good for Half Off Depot.
So the short answer is the Groupon IPO is good for Half Off Depot as it will make it harder for smaller underfunded companies to remain viable and they validated the market in which we participate.
All we have to do is execute on that different money making part. That will keep us busy for awhile.
When I joined Half Off Depot back in May I started looking around for a competitive target. Not the 800 pound gorilla Groupon LivingSocial type of competitive target. A smaller yet significant company that we could set our sights on. That company was BuyWithMe.
As best as I could tell BuyWithMe was the number three player at the time. Founded in Boston, based out of NYC, BuyWithMe was actviely operating in a dozen or so major markets. They had raised $21.5 million from Matrix Capital and Bain Capital. The kind of number that makes our $7 million seem small.
And BuyWithMe was on a tear. The online deal market is going to consolidate and BuyWithMe was playing the role of consolidator, something that I would like to do. In 2011 they acquired six competitors, the most recent being in September. Then the wheels fell off.
Just six weeks after its last acquistion BuyWithMe choked on them. BuyWithMe laid off half its workforce after reportedly failing to close a new round at a $500 million valuation. It was reported to be looking for a buyer.
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The opinions expressed here are mine and mine alone (with the exception of comments by others of course). They do not represent the opinion or position of any other person or entity. All postings adhere to my personal values.