A VC in Vacationland

Supply Chain & Marketing Innovator: Pop! Technology

You should check out Pop! Technology just to view their cool website and demos, including one on YouTube.  Never have I seen animation used so effectively to sell a product, except of course in video games.

Founded in 2004 by Jon Cameron, Pop! Technology holds a broad methods patent on integrating bar codes with thermal indicators.  What, you say?  Aren't all the RFID guys running around trying to monitor product temperature variations with complex chip/reader technologies?  Yes, they are, but how about a simpler solution, like one integrated with our old friend the bar code.  The Pop! Technology solution allows you to attach a thermally sensitive bar code that can be read by anyone's UPC readers and have the data reported out to IRI and Nielsen.

So who cares?  It turns out that a lot of beverage manufacturers do. Before Pop! Technology, companies just got total beverage sales by store, not sales by on-shelf(warm) versus cold vault.  It turns out that beverage marketers care a lot about how to position their product in stores and Pop! Technology thermally sensitive bar codes can tell them which products were sold warm and which cold.

The same is true for many pharmacy products, which must be kept in certain temperature ranges to avoid affecting the efficacy of the drug.  Pop!'s bar codes can report when those parameters have been violated in the supply chain and where the violation happened, assuming the products are scanned during the shipping process. The data can then be reported back to the shipper via existing shipment tracing capabilities.  UPS, for example, can support such thermal reporting today as part of its overall shipment tracking process.

In addition, Pop! has developed an anti-counterfeiting, anti diverting solution for the pharmaceutical industry, in partnership with BTI.  The solution is much simpler than the current ePedigree technology, using a 5-way check which can be done at any point in the supply chain, even at the consumer level.

From a food safety perspective, the technology has obvious appeal.  Being able to track temperatures in the cold chain is a big deal to consumer wanting guarantees about how their food has been handled. Unfortunately, one could strip off the "bad" (high temperature reading) bar code and put another one on, but not if the only labels were available at the producer.

Pop! Technology is still operating in a pseudo-stealth mode, since many of their major clients want the technology to be a well-kept secret (read: competitive advantage). However, they have not signed any exclusive deal, so you can get in on the action if interested.

Founders: Why Should You Stay

Last week, we examined the conditions under which a founder should leave the company that they started and grew.  This week, we look at when a founder should remain active in their baby.

How can founders be involved?

• Critical Relationship Management--Founders often have very close relationships with key customers, channel partners and employees.  Finding ways to take advantage of those relationships on an ongoing basis is an excellent way for a founder to stay involved and help grow the company, as long as it is in conjunction with existing senior management.  Having a founder "responsible" for the relations with a key customer is not a good idea, either from the company or founder perspective. For example, the founder may not be fully aware of all that is going on in the company and could make mistakes advising customers on new product enhancement timetables.
• Science Advisor--Founders are often the brains behind the technology.  If the founder has remained current in the field, then they can be valuable contributors to product development plans. Let the founder chair a scientific advisory committee, but make sure that management is heavily involved so that the recommendations are in tune with evolving customer needs and marketplace challenges.
• Institutional Memory--CEO's need sage advise to make sure that they do not do something stupid.  Founders likely made a lot of mistakes early on and can help the current management team avoid them in the future.  There is a fine line between advising and meddling, however.  A founder should only act as institutional memory when asked, and not run around the management team regaling them with stories of "how I did it in my day".

It takes a special founder to serve as the right type of adviser to their start up.  Understanding that someone else is now responsible for driving the company forward is a hard transition for many founders to accept.  That is why you see so many of them sitting on the sidelines and stewing about the value of their founder's shares .  Get over it, founder, and get on with your new life.  Offer to help but don't be upset if no one calls. And remember, if all is successful, everyone will give big credits to the founder, no matter who made it ultimately happen.

Founders: Why You Should Move On

Let's get the band back together!

One of my son-in laws recently revived his band, after a seven year and two grandkid hiatus, to play at a close friend's wedding.  Since we had never heard him play, we invited ourselves to the post reception party (as in "It's OK, I'm with the Band"). Let's just say it was not the best idea to restart the band, but my son-in-law is a terrific drummer, nonetheless.

In the same week, the founders of two of my portfolio companies approached me about either taking over again or wanting to stay in power longer. So the whole "let's get the band back together thing" triggered some thoughts about whether founders should continue participating in the management of the companies they have helped found.

I'll tell you my "returning founder biases" up front--only in very limited situations should founders stay around in management roles. Unless you are a founder like Steve Jobs ( a clear success) or Michael Dell (jury still out), you are probably better off deciding what you want to do next in your life, rather than trying to relive an earlier success.  Further, everyone is replaceable in this world and you should have already ensured that the right resources are available to carry on what you have begun and nourished. Finally, if someone wants to go through all that start-up misery again, I begin to question their sanity. 

So, when should founders move on?  Continuing with the overworked music theme, perhaps The Clash (Combat Rock, 1981) have an answer:

Should I stay or should I go now?
Should I stay or should I go now?
If I go there will be trouble
An if I stay it will be double
So come on and let me know.....

Seriously, here are some thoughts on when the founder should consider moving on:

• Scaling the company--most founders have not lead a company through various stages of revenue growth.  Entrepreneurs are usually great at getting a company going, raising some cash, designing and building the initial product and attracting launch customers.  But many entrepreneurs are not interested in the day-today miseries of running a business, hiring the next round of talent, adding infrastructure, etc. etc. Investors begin to see that the company's growth potential is limited by the inability of the entrepreneur to scale employees, customer service, channels, development and operations. It is not really the founder's fault.  If you have not done it before, why should you be expected to understand the process when you have no play book in your mind?
• Management failure--It is not uncommon, even after a founder has relinquished their C-level roles at his or her company, for a management failure to occur.  An initial reaction by many founders is the urge to run in and save their baby.  It may have been more than a few years since the founder had any direct operational responsibilities, but the urge is there.  They begin to lobby the board about "taking over again", often denigrating current management for screwing up.  Again, unless you are very close to the company and really know the way out of its problems, you are better off spending your time finding new leadership who have a vision forward, rather than try and remake what worked in the past.  Michael Dell was quite clear to his employees on Day 1 of his return to Dell that the old ways were not going to cut it.  We will all see if his new ways work, but looking for new solutions that build on past success is the right way to approach the issues. 
• Back to the Future--Another related example of why founders should let others move the company forward is that some founders believe it is totally wrong to change how a company worked under their regime. The movie, Back to the Future, may be fun to watch, but it is sure no way to run a company.  Even when things are going well at a company, the founder may not like the version of success being enjoyed by the current management and try and reverse course.  This is always a bad idea, even when management failure is involved.

Next week, we will look at some reasons founders should stay involved with their companies.

Supply Chain Innovators: Freight Rate Shopping

A few years ago, getting freight rate comparisons from major ocean, air, rail, parcel, express, LTL or TL carriers was a major headache for companies trying to shop for lower shipment costs. And if you were a small shipper, it was difficult to get a return phone call.  Recently, a plethora of Internet-based companies have emerged--FrtRate, carrierstore, ediscountfreight, uship, networkFOB, logisticshq and freight trucking to name a few who are working to provide higher levels of service and better rates to small companies.

Freightquote is the largest web-based service that provides quotes from over 50 major carriers, along with automated dispatch, tracking and documentation, among other services.  They have attracted serious investors, including a $70 million stock purchase by Great Hill Partners in December 2006. They also have a exclusive deal with eBay to provide shipping services to auction customers and sellers.

RedRoller is a newcomer to this space, offering a web-based freight rate comparison service like air travel comparison sites, such as Travelocity.  RedRoller's no-cost service allows shippers to book orders and pay shipping costs on its web site.  They also sell shipping supplies on the site. They have raised $2.2 million from 59 investors since 2004.  Shippers can look up prices and services offered by a variety of regional and national carriers, including the U.S. Postal Service, FedEx, Overnite Express and DHL Worldwide.

FutureFreight, which is trying to establish a freight futures market in the U.S. (without much luck), is a natural extension of these sites.  Being able to forward purchase capacity at guaranteed rates, with the option of being able to trade these contracts in a marketplace if you needed to decease or increase commitments would provide much needed hedging tools for shippers looking to ensure capacity availability.  Rumors are that the CBOE is also actively looking at developing a futures market for certain types of freight haulage, primarily in the basic commodities space.

This is all well and good for the shippers, but it got me thinking about whether this space is a good investing opportunity.  Great Hill Partners has a stellar reputation for picking winners. I do think their late stage investment in Freightquote will pay off, as they are likely to be sold or go IPO in the next few years. But I would not invest in any of the new start ups.

Here's why.  These services only provide modest savings over base carrier rates. A benefit for sure for many shippers, but it does not give them access to the deeper discounts available to volume shippers. What small shippers need is access to a consolidated purchasing network of shippers that will let them have increased leverage with carriers. There are such networks under development and that's where I am putting my money.  More on this topic when these companies come out of stealth mode.

Sucky Start Ups

Here's a web site, sucky startups, on which you better hope you never get a posting.

I guess it is inevitable in this new world of "everyone's a critic" that such sites arise.  I did check out some of the sucky start ups and many were not great in present incarnations.  But, hey, start ups are a work-in -process and feedback is critical to their success.  Some of the criticism was well deserved and some was just ranting.

Pardon my melodramatic rant for the moment, but people have worked hard, perhaps invested a lot of money and have dedicated themselves to bring an idea to market.  All that is worth something, even if the idea is not quite right (or may never be).

What ever happened to politeness and constructive criticism??

End of rant...thanks for reading.