Sausage-Making: Owning Your Market

by Lenard Marcus, Principal

We hear from our CEOs and their teams that what they value most about Edison events are the interactive roundtable discussions. Our 2014 CEO Summit did not disappoint in this regard, as we held a series of “sausage-making” rapid-fire, 30-minute roundtables focused on key topics driven by the 90 CEOs and Edison Director Network members in attendance. Chris Sugden and I facilitated the topic, Own Your Market, with John Bailye, Jeff Canter and Medhi Teranchi leading three respective sessions focused on market leadership and channel strategies.

Following are the key nuggets that stood out for me during these sessions:

1. Stay humble.  John Bailye, former Dendrite founder & CEO, highlighted the conundrum of striving to be recognized as a market leader by the market at large, trumpeting a market leadership message to the internal workforce, and all the while, taking a more humble approach publicly.  He noted that, often times, industry analysts can anoint market leadership positions with “magic quadrant” placements, but the key is for companies to own their market message and positioning.  So, rather than declaring victory to your prospects and customers that you are the market leader, take a more intelligent approach through behaviors that are differentiated and communicate true value add.  James Green echoed John’s point and described his team’s success with cleverly leveraging notable industry influencers to discuss relevant market dynamics at Magnetic events. These events draw potential customers for the company and its brand benefits from alignment with other market-leading brands.  Good stuff.

2. Enable direct sales to make your indirect channel a force multiplier.  Channels done right can certainly be an accelerator of market leadership.  Uptivity CEO Jeff Canter shared how he effectively integrated channel sales into a pre-existing direct sales model, where his sales reps maintained, grew and were compensated on account relationships, and partners provided and were compensated on the services. With compensation being the primary challenge in making channel sales work, Jeff advised his peers to avoid the temptation to compensate channel sales at a substantially lower rate.
   

3. There’s no half-way in channel sales. NSI CEO Medhi Teranchi is a strong proponent of building channels for long-term momentum for the business, and as such, advised other CEOs against “dipping your toe into the channel.”  It’s black and white: Your business either invests in the channel, or goes direct. Reps may continue to be involved in most, if not all, deals (as John Becker indicated they are at Sourcefire) and must work to partner with the channel.  Likewise, Marketing spend must be allocated to support the channel, including special programs for the top performers.

Great discussion and debate from all CEOs involved. All in all, participants acknowledged that every company will claim market leadership, so the key is to own your message on your terms and appear humble in the market. Likewise, channel sales can be a strong lever to owning your market and driving enterprise value. Of course, developing a thriving channel business will not be without stumbles and pitfalls, but if the product is strong and the channel is truly supported, there will be a higher likelihood of success.

 

What It Takes to Lead & Create Billions in Market Value

by Chris Sugden, Managing Partner

At our recent Edison CEO Summit, we were very fortunate to have Tom Ebling and John Becker join me to discuss their experiences building marketing leaders and billions in market value. Tom and John began their careers as executives in Edison companies in roles other than CEO (one was a CFO, the other head of development). We are grateful to have both Tom and John as active members of the Edison Director Network. They have each created companies with market caps of more than $1B. In fact, both have exceeded $2B enterprise values in companies they led.

In keeping with the Summit’s theme, Inspiring Leadership, during the fireside chat, Tom and John shared stories about their leadership experiences, including incredible insights and key lessons learned.

Here are some of my favorite lessons.  The session can also be viewed on Youtube.

Lesson #1:  Leadership (or as President Obama calls them, “learning moments”)

1. Learn to be connected.  Tom described a time when Demandware grew to a size where he did not know as many people personally as he once did, yet realized employees were keenly observing and drawing conclusions from his words and actions in a way that was not prevalent when the company was smaller.This highlights the importance of CEOs staying connected to employees by getting out of your office, walking around, talking to people on the front lines, as well as keeping “an ear to the ground” through trusted team members so that you have an ongoing sense for organizational temperature.

2. Learn to be observant.  John used to sit in the front row ready to learn and absorb.  One day his mentor encouraged him to sit in the back of the room, suggesting he would learn a lot more from that vantage point, e.g., who is and is not engaged and how does that correlate to their performance?  While you may be at a sales kick-off or quarterly business review, these represent excellent opportunities to observe team members who are not on stage, so to speak.

Lesson #2:    Board Management Do’s

Boards are best utilized in an advisory capacity where they share experiences as well as challenge and guide the business. It is the responsibility of the CEO to manage his/her board by framing the necessary discussions (after all, the CEO has access to more information than board members). Use meeting time in a way that leads to the best possible outcomes.

Here are John and Tom’s board management do’s:

1. Send board package at least three days in advance, expect that it will be reviewed and set agenda accordingly
2. Use a standard dashboard as a common way to share and discuss key business metrics and dynamics
3. Change up the meeting agenda and format as the state of the business requires (i.e., issues are not the same each quarter)
4. In the interest of reaching agreement or resolution on key issues, socialize specific topics that require action or a decision in advance once the package has gone out.

Lesson #3:  Growth vs. Profitability – the “Catch 22”

Many Edison CEOs have tough decisions to make regarding maintaining and accelerating growth (and raising capital to do so) versus getting or staying profitable.  Both Tom and John place a high premium on growth and encourage companies to step on the gas when they start to see growth trends.  Tom provided an example indicator for when it’s time to accelerate (this was also echoed in Kelly Ford’s (Edison CMO) session, Supporting the Entrepreneur’s Journey):  When you have proven customer value to the extent that customers are renewing and expanding their investment with you. Are you bringing in significant CLTV relative to the level of sales effort? This is a great sign of potential scale.

Lesson #4:  Exits: IPOs vs. Strategic Sales

Growth-stage CEOs think a lot about which direction to take their companies – getting public or getting sold — and when is the right time to take one path versus another.  Tom suggests that businesses with significant market opportunity and product aligned to that market, i.e., the total addressable market is significant, should run as though it will go public from a very early stage. As the time to go public gets closer, be more, not less, transparent about plans. John added that every CEO should run his/her company as if it will be taken public, because the reality is that ninety-nine percent of businesses don’t get acquired. Acquisitions are typically opportunistic with external factors at plan that cannot be predicted. As an example, there were only four buyers for the four companies John has sold throughout his career.

As an aside, Edison’s recent experience is that financial buyers are active; however, these buyers tend to lower initial offers in order to lock up a deal assuming they will find something in diligence. My belief is that this trend will continue until such time as entrepreneurs, VCs, boards and bankers exclude financial buyers from the finalist group of bidders unless they will be held to a very short (< 60 day) exclusivity period from LOI to closing.

Lesson #5: Toughest CEO Decisions

Both Tom and John have faced many a tough decision in their careers as CEO. I asked them to share one that was among the toughest. For Tom, it was a recent decision for Demandware to pursue expansion into Japan, the second largest market for retailers and brands in the world, and the most difficult market to penetrate for an American technology company. The primary considerations were when and how, and while the company has benefited from having board members who could share the dos and don’ts based on relevant experiences, there seemed to a lot more don’ts than dos.

The tough decision that stood out for John was whether or not to turn down an offer to buy his company. There was pressure from the board to accept, but he felt strongly about the value of the business and that it was worth more than the offer.  As it turned out patience paid off and having an option was critical. John did ask for more — and he got it.

 

Lesson #6:  Common Young-Company Mistakes

I asked Tom and John to bring to light the two common mistakes they’ve seen young companies make, so that Edison CEOs can steer clear from making the same ones.

1. Don’t throw the baby out with the bath water.  Whether you are a company with a solution in search of a problem, or you simply have not proven repeatable value yet, it is normal to shift gears here and there. Tom encourages healthy experimentation, but advises to “stick with it.”
2. Focus on the long term and try to see the forest from the trees. It’s easy to lose sight of longer term vision and the journey itself when the business requires so much focus on the here and now. John advises, “Don’t get too bogged down with closing that deal this quarter.”  Pick your head up and think about the journey and the broader set of opportunities – it’s aspirational and motivational for you and your team.

Why Should You Care About Big Data?

By  Toby Zhang, Associate

At our annual CEO Summit last week, Phil Simon, author of The Visual Organization and Too Big To Ignore: The Business Case for Big Data (and New Jersey native!) led a session, What’s Your Big Data Credo?  And Why Should You Care?  Phil’s insights are helping corporations, entrepreneurs, and investors alike understand what Big Data is all about. Similar to “cloud computing,” this can be a nebulous concept. I’ve excerpted two aspects of Phil’s session that I think best explain not only why it matters, but also the potential implications for harnessing it for your organization.

1.     Volume, Variety, Velocity

These three Vs were coined by Gartner to characterize big data. Phil goes further to suggest that the data is primarily external to the enterprise, and unstructured.

In the late 90s, a gigabyte of storage cost roughly $100, and today it’s $.05.  As storage costs have decreased exponentially over the years, the volume of information individuals and corporations need to store is increasing exponentially. And where data, once upon a time, was generated solely by companies, their partners, and their customers, today, data, more often than not, is generated by machines. But the sheer volume of data alone isn’t what’s the most interesting or challenging about big data. Rather, it’s how to readily store, process, and retrieve the same high volume of data without sacrificing performance. Innovators are tirelessly finding new ways to scale. Today, NoSQL databases (e.g., Aerospike) and distributed processing (e.g., Hadoop) are among the many ways businesses manage their ever-expanding volume of data.

Today, businesses are capturing data from diverse sources as they strive to understand their customers. To truly understand a customer is to understand a variety of data produced by the customer across a multitude of devices and form-factors: smart phones, tablets, laptops, beacons, etc. As devices become more mobile, data types such as geo-location and NFC (Bluetooth) become more accessible and useful, which drive more intelligent business decisions.

What’s more, the social media revolution has made information access a commodity. The velocity by which a tweet can become viral is astounding. In the past, data was transferred and analyzed through a batch process, where a data payload is submitted to a server and results are delivered after a period of processing time. This scheme quickly breaks down when the rate of submission exceeds the rate of processing. Today, data throughput is continuously improved through higher processing power, advanced network infrastructure, innovative compression algorithms, parallel computing methodologies, and much more. Businesses today face important decisions on methods for collecting and delivering.

2.     Behind the Hype: It’s Getting Technical, Fast

To capture the value behind big data, businesses will have to invest in understanding the technical aspects of working with big data. Those who develop a concrete grasp of the following will be much more effective in extracting value from their data initiatives.

• Managing meta-data: Meta-data is the data about data, and can often be more complex than the actual data it describes. Managing meta-data effectively will translate into swifter data queries and better performance for customers. Meta-data footprint can also become increasingly taxing over time in complex systems.
• Managing data across repositories: Distinguish between “hot” and “cold” data and architecturally allocate proper resources for each. Hot data is more frequently accessed, thus demands more robust hardware with higher processing power. Cold data is less frequently accessed and usually leaves room for cost savings.
• Managing data history: Leave the proper bread crumbs or paper trail for data scientists to quickly understand the data’s source and propagation. When results are not as expected, data source and methodologies can often be called into question. It’s neither right nor wrong, just human nature. Effective management of data history can help get to the bottom of issues quickly when they arise.
• Managing data reliability or “hygiene”: Place the necessary automated validation procedures on incoming and outgoing data streams, e.g., ensure millions of product SKUs have the right price and quantity. Dealing with sensitive data (consider bank data) will require minimum to zero tolerance for inaccuracy. Data validation can help discover and resolve issues timely.
• Managing the right amount of data: Analyzing data is expensive, so over-hiring data scientists and over-analyzing data can do more harm than good.
  

 

Bottom line:  Don’t run the risk of getting caught up in the fad of big data without really understanding the implications for your organizations. Dan Ariely, Professor of Behavior Economics at Duke University has become known for this statement:  

While reality is not so extreme, these are words of caution to start small and be thoughtful about it – avoid being dragged down into the hype, or even worse, crossing an ethical line.  For example, the NY Times published an article regarding Target’s ability to determine which shoppers are pregnant. Phil references this story in his book, Too Big To Ignore.  Why wouldn’t Target, or any retailer, for that matter, want to use as much information as it could to sell more merchandise, especially given the threat of pure-play online retailers turning brick-and-mortars into showrooms?  That said, Phil suggests using this as a general rule:  Just because you can doesn’t mean you should.  I tend to agree.

I’d like to hear your feedback and comments. Please feel free to comment here or reach out to me directly at tzhang@edisonventure.com

Supporting the Journey to Market Leadership through Sales & Marketing Acceleration

By Kelly Ford, CMO

Last week at Edison’s CEO Summit, I had the pleasure to meet dozens of CEOs from Edison’s portfolio companies and introduce our new Edison Edge advisory offering, the Sales & Marketing Acceleration program, intended to help our portfolio companies build scalable marketing machines that deliver differentiated products, market presence and strong pipelines along their journey to market leadership. The program is based on a simple three-step journey, representing sales and marketing opportunities and challenges along the way.  

Investors and business school professors might put this journey into slightly different terms such as Getting Commercial > Getting Scale > Achieving High Growth. Same thing — all of the important business initiatives and metrics that support each stage are aligned.

The first stage is all about proving Customer Value. At this stage, there are three key opportunities for delivering a measurable and accelerated impact on the business:

1. Acquire customers and prove value thoughtfully and quickly, so happy customers can help you acquire more customers
2. If your product is solving for a problem or opportunity that’s relevant to more than one industry, go after more than one industry. The idea of the extra work and complexity in your go-to-market approach is may be overwhelming, but successfully proving similar value across multiple verticals is a major acceleration lever.
3. Build awareness while you are building out the lead generation machine – then, make them both work together.

During a first year of effectively making these three things happen, Marketing should be expected to contribute 30-40% of Sales Qualified Leads and 20-25% of closed deals.

Edison’s Sales & Marketing Acceleration program can help guide these and related initiatives. The below visual cites example advisory modules serving this stage of the journey.

The next stage is focused on Cementing Category Leadership.  The dynamics at play here:

1. The press and industry analyst community know who you are and probably recognize you as a leader.
2. You have meaningful customer results and are now focused on expanding and deepening those relationships.
3. You are seeing new entrants in the space, which means a) you are thinking about competition like you may not have been in the past, and b) you cannot settle in to being the creator of your category – you now need to innovate and expand into new markets to truly lead.

Expect Marketing to be pulling levers at this stage that contribute 50% of Sales Qualified Leads and 30-35% of closed deals.  Following are some example advisory modules that focus on driving category leadership. 

And then your company aims to evolve from a Product company to a Platform company. In order to achieve this:

1. Predictability must exist in both marketing and sales funnels, as well as with implementation practices.
2. Your platform needs to be sticky. Land-and-expand sales execution has paved the way for some level of stickiness, and now, evolving packaging and pricing strategies may be the key to delivering value in a way that locks in customers.
3. A thriving ecosystem must develop around the platform.

At this stage, the Sales team should be more productive than it’s ever been because Marketing is contributing 60-70% of Sales Qualified Leads and 50+% of deals.  Following are example areas of advisory available to support this stage. 

For Edison companies, access to advice and resources is available on an informal or project basis, and supported by practical execution frameworks and templates, as well as other useful downloadable content and perspective that will be published to our blog on an ongoing basis.

The first major deliverable of the program will be the Edison Sales & Marketing Index, designed to help our portfolio prioritize key metrics to be measured so you know how you are doing, as well as benchmarks so you know how you are doing against your peers. A dashboard will be published periodically with that data and I will be on hand to help interpret and guide relevant activities based on benchmarks.  The Index is a top priority for us, as we’ve heard loud and clear from our network that there’s a real need.

The priorities of Edison CEOs and their teams will continue to drive our priorities across the Sales & Marketing Acceleration program.  Any and all topics and ideas for making this program relevant and useful are most welcome.  Feel free to comment here or reach out to me directly at kford@edisonventures.com.

Create a Repeatable Winning Sales (& Marketing) Engine

By Kelly Ford, Chief Marketing Officer

We had the pleasure to host Elay Cohen at the Edison CEO Summit last week for the Create a Repeatable Winning Sales Engine session. As the co-founder & CEO of SalesHood, former Senior Vice President of Sales Productivity at Salesforce.com, and author of SalesHood: How Winning Sales Managers Inspire Sales Teams to Succeed, Elay is a savvy product guy who has spent his career bridging sales and technology to create fully empowered and productive sales professionals.

From the attendees’ perspective, it was wonderfully coincidental that Elay’s session reinforced David Marquet’s leadership strategy — to shift decision making as close to the point of information as possible. In the case of driving sales productivity, this encourages first-line sales managers to “think like a CEO and act like an entrepreneur.” Easier said than done, right?  Well, at Salesforce, with Elay’s leadership, the company grew from $300M to $3B, due in part to this sort of sales empowerment and training while onboarding over five thousand reps. Authority was pushed down to front-line sales managers to enable them to make marketing and recruiting happen for their territories—and they owned the outcomes.

Elay shared a powerful metric — that sales productivity is a $60B problem. Of course, there could be several drivers of this for any given organization, but the primary one is typically lack of sales and marketing alignment, or rather, partnership. Salesforce appears to have a Sales-driven culture and hence, not inherently an environment where Sales and Marketing are aligned in true partnership to drive sales outcomes. So, not surprising that Elay’s organization resided in the Sales organization (more typically, sales content development and enablement is owned by Product Marketing) and aspects of marketing program spend was allocated to sales managers (vs. the Lead Generation team).

That said, Salesforce obviously has realized tremendous success with their culture. My experience suggests that when CEOs “own it” and can ensure Sales and Marketing execs are true partners working in lock-step with shared goals, and can marry that with an empowerment culture, this lays the most powerful foundation for a winning sales engine. Goes to show there is no absolute right answer.  The key is recognizing what works (or what you want to work) for your company and architecting the machine to continually optimize for results and, ultimately, scale.

(Back to the session.)  The audience represented on average $27M in revenue and sales organizations of roughly 15-25 reps. Here are some of my key takeaways:

1.  Strike a balance between repeatability and personalization. There is a place for playbooks and scripts, but there’s a balance to be struck between repeatability, message consistency and a salesperson’s ability to personalize the pitch. There is no one-size-fits-all selling style, so Sales should have the freedom to personalize. And when creating the core deck, for example, Product Marketing should factor the most effective selling styles on the Sales team and how the best reps may make it work for them. A collaborative process in sales tool development will ensure adoption and productive iterations.

2.  Make ongoing sales education, well, ongoing. And make it a collaboration between Marketing and Sales. At Salesforce, Elay instituted monthly themes for sales meetings.

• Week 1: Theme kick-off & forecast
• Week 2: Education topic & pipeline
• Week 3; Education topic & pitch
• Week 4: Close on theme & celebrate

This is a perfect opportunity for Sales and Marketing alignment where themes are devised together. Marketing tees up the theme, creates the content and, for example, on Week 2, presents it, then the team spends the week digesting/practicing the message for the next week, when what was presented gets pitched and the group provides feedback. Rinse and repeat each month.

3.  Establish an onboarding discipline. At Salesforce, Elay’s expectations were for SMB sales reps to put points on the board in 30 days and enterprise sales reps in 90 days, which are wonderful productivity targets. His recommendation is to focus on “the firsts first” by instituting a disciplined onboarding schedule that includes enablement, allocated time for practice, trainer/manager inspection, and inspection by others. Again, rinse and repeat week by week.

4.  Measure and be transparent about it. Elay shared a solid framework for measurement: Activity, Pipeline, Revenue. Activity from an outbound prospecting perspective may be the number of emails/calls/connects required each week or month to create a certain volume of pipeline opportunities and ultimately a certain volume of new logos and bookings. Adding Marketing activity expectations that translate into Marketing’s share of pipeline and revenue ensures a complete picture. And publishing a comprehensive scorecard helps foster a metrics-driven culture that promotes transparency — and the recognition and shame that comes with it.

In tomorrow’s post-CEO Summit blog, we’ll continue this thread with an overview of Edison’s new Sales & Marketing Acceleration program.

Building Leadership at Every Level

By: Joe Allegra, General Partner

Last’s week third annual Edison CEO Summit was a tremendous success, with more than 65 CEOs and Edison Director Network members in attendance. Our distinguished speakers and attendees brought important insights to the two-day sessions. This is the first in a series of articles summarizing the event.

We kicked off with a keynote by David Marquet, a former nuclear submarine commander and author of Turn the Ship Around! A True Story of Turning Followers into Leaders.

David told us a fascinating story of unexpectedly taking over the worst performing sub in the Pacific fleet and turning it into the best performing within a year. He was an engaging speaker who was able to share actionable leadership tactics – the very ones he exercised to effect this dramatic turnaround.

I had seven key takeaways from this session:
1. Leaders can’t make all of the decisions. They need to push down authority in the organization to the people that have the information and let them make the decisions. BTW, this is not typical Naval doctrine, as the Navy teaches that commanders make all of the decisions.

2. Yes, there are going to be mistakes. In order to achieve greatness, you need to make mistakes. Create a culture where people are encouraged to make decisions and don’t get crazy if this results in some mistakes. Mistakes will happen; get over it.

3. Encourage people to think; not just do what you tell them. This is a big issue for me. Our portfolio companies have a lot of great people. We need all of their talents, energy and brain power to achieve greatness.

4. Make the way you run your company a leadership development program. The idea is to create a leadership culture. Don’t just talk about leadership. Make the core principles that you are trying to get across your standard operating behavior.

5. Act your way to action. Don’t think your way to action; act your way to action. Indecision is a decision. In most cases, your decisions are not going to be 100% wrong, maybe only 20-30% wrong, so be prepared to make course corrections along the way.

6. Environment matters more than you think. Leaders don’t change people. Leaders create environments where people can be great.

7. Do the thing that implements empowering. What about your culture doesn’t empower? Change it. Ask your team members for their recommendations. Ask questions; don’t dictate your views.

Perhaps one reason I really enjoyed this session is that it reinforced some of the experiences in my career. I never thought I was a good enough manager to “manage” people to greatness. However, I have always been a believer in giving people the vision of the mountain we were trying to take, encouraging them to commit to that goal, turning them loose to figure out how to get there, and playing the role of cheerleader and supporter on the journey.

IRCE 2014: Top 4 Emerging Ecommerce Technologies

By Toby Zhang, Edison Ventures Associate

Each year, 10,000 strong attend the world’s largest ecommerce event, the Internet Retailer Conference and Exhibition (IRCE) to explore these and other online marketing challenges. This year, I was among the 10,000. Of course, the event attracts an all-star cast of speakers offering insightful talks and workshops, but I preferred spending my time simply walking the exhibition – among 600+ companies filled a 250,000 square feet at the McCormick Place in Chicago.

Following are the four most exciting themes from my experience on this year’s IRCE show floor.

1.       Scalability through machine learning

A search algorithm, a data model, or a content interpreter, is only as good as the data scientists who developed them, unless the tool itself can adapt to its environment, learn, and get smart on its own. The concept of machine learning is not novel (we’ve seen applications of this concept in speech recognition, auto-correct, etc.), but its applications in e-commerce and online advertising are becoming interesting. Until recently, to gather and analyze increasingly complex customer data meant to add more data scientists to the payroll – not scalable. We are now seeing companies offering machine-learning driven solutions that enable customer data models to auto-adjust parameters when new data is collected and analyzed, eliminating the need for manual intervention. The result is faster data interpretation, lower operating cost, and higher gross margins. Watch this space, and specifically Reflektion.

2.       Omni-channel predictive science – more than just the cookie diet

While many of today’s predictive technologies attempt to understand more about customers and their behavior, few really stand out. Less interesting approaches are derived from browser cookies dropped on customers’ machines. Browser cookies are good at telling from where customers were re-directed, which pages they view, and where they go after leaving your site. But with everything is shifting to mobile, browser cookies are limiting as they lack intelligent sharing across multiple form-factors (though some folks are actually working on this). Most predictive technologies today are not yet able to accumulate and interpret cross-platform data to build a true customer “profile.” However, we are starting to see some innovation in this space.

Additionally, predictive technology will begin to play an increasing role in the social space. The combination of predictive technologies and social network data (e.g., friend lists, geographical information, statuses, time of posts, likes, etc.) can be very powerful, as marketers are keen to know exactly the right time to display which content types, how often, and through which medium.

I liked what I saw from Custora and Cquotient at IRCE.

3.       Natural Language Search

I am a firm believer of online experiences that promote convenience, e.g., minimizing the number of clicks required to find what you are looking for on a website. When searching through online catalogues, traditional keywords are no longer sufficient when looking for products with a precise set of characteristics – size, color, shape. Consumers tired of searching “sweaters” on a site, then filter through gender, brand, size, color, and price to find the one they want. Rather, a preferred experience is to search “Men’s medium blue Ralph Lauren sweaters on sale under $50”, which returns more relevant search results quickly. In the competition for consumer time and attention, the online retailers that can get customers to what they are looking for the fastest will have an upper hand.

The big players are already doing natural language search today. Facebook does this with its graph search today; Apple does this with Siri; Google is also doing this with their recent algorithm changes. Notice a pattern?

Natural language search for ecommerce is an important next step. With the big guys heightening consumer expectations, online retailers that do not offer it risk staying relevant and competitive.

Check out EasyAsk and Aspectiva.

 

4.       Dynamic content and image processing

From the time a consumer receives a promotional email to the time he or she actually opens the email (if he or she opens the email) many things (e.g., product availability, discounts, customer preferences, etc.) may change, rendering contents of the email irrelevant. Today, online retailers are partnering with personalization platforms to deliver dynamic marketing and advertising content. Essentially, this means email content, among other marketing content, is refreshed at the instance of access, delivering only the most current and relevant information — from product recommendations to discount offers. This combined with predictive sciences can be very effective 1-2 punches for converting impressions into sales. Cquotient plays here, too.

Finally, digital image processing can be used more creatively today to drive conversions. Valuable information (color, subject, content, focus, foreground, background) can be extracted from digital images and leveraged by marketers to understand the best possible experience to capture the consumer’s attention. Combine this with A/B testing and conjoint analysis and retailers have powerful way to determine the most suitable marketing experience for different customer segments. I like what LiquidPixels is doing in this regard.

These emerging technologies make for exciting times in ecommerce. I’d like to hear your feedback and comments. Please feel free to comment below or reach out to me directly at tzhang@edisonventure.com .

What Keeps Growth-Stage CTOs Up at Night

By Toby Zhang, Edison Ventures Associate

To build the next great product or service, every company will require its Chief Technology Officer (CTO) to place bets on the right priorities. Last week, I had the pleasure to join CTOs from 40 Edison portfolio companies – past and present — at Edison’s annual CTO event, an intimate half-day forum at the Trenton Country Club for CTOs to pool experiences and collective thoughts, bounce ideas off of one another, and share their strategies and challenges. Much of the discussions this year revolved around important issues that keep CTOs up at night. The standout issues: Recruiting and retaining talent; Scaling SaaS; and Security, security, security.

 

1.     Finding and retaining technical talent

A-players are critical for every entrepreneurial organization, yet finding and keeping them is ever- challenging.  Location, compensation and upward mobility are primary factors at play, but one can only hope that your not competing on these terms with large tech firms (Apple, Google, Facebook, etc.).  Large techs today offer six-figure salaries and attractive benefits to experienced hires and fresh college graduates alike. Having had spent three years at Microsoft as program manager right out of college, I’ve witnessed first-hand how large tech companies attract and keep talent.

At the event, Manny Berrios, CTO of MediaBrix, shared his three greatest motivating factors for technical employees:

• job role and responsibilities
• compensation and benefits
• work environment and culture

Today, many large tech recruits decide to pursue an alternative career path after just a few years (e.g., many of my Microsoft colleagues, who joined when I did, have left to join startups).  One advantage of signing on with a startup is that there are always more and new things that need to get done, so there is never a lack of important things to do. As such, A-players entrusted with important roles and responsibilities are more likely to be satisfied about his/her job, succeed further, and grow with the company for years to come.

 

2.     Scaling Software-as-a-Service (SaaS) businesses

As traditional businesses move to offering their products and services online, the SaaS business model is becoming the preferred way to deliver software content and services to customers. Just as we witnessed the rise and decline of compact discs as a dominant media storage solution in the past 25 years, same can be expected of on-premises data centers. However, SaaS as a high-margin, high-serviceability business model is not without its own share of challenges. CTOs today actively look for a better way to scale while maintain service levels and performance metrics.

In a typical architectural environment with multiple database servers, and multiple shared and customer-specific tables, hotspots will exist. “Adding servers solves for scalability”, Mark Heys, CTO of Vocus, explains, “but investment in a good framework is the key”. Mark and team at Vocus built a custom framework that abstracts the complexity of multi-database architecture to provide developers a simplified approach to scaling horizontally. In addition, the framework enables servicing of the production environment on demand without scheduled maintenance. Furthermore, the framework approach to scalability instills more confidence with customers by allowing them to test with production environments (with phantom accounts) rather than QA environments. All in all, CTOs agree that a good scaling paradigm starts with a good framework.

 

3.     Security

From denial of service to phishing, malicious cyber-attacks are common for businesses of any size, sector, and function. Businesses will only experience more cyber-attacks as they grow and mature. Jim Eichmann, CTO of Billtrust, motivated the group to “build a culture around security, instead of doing the minimum to pass regulations and audits”. He provided the following musts for building that security culture:

• Employee awareness. The first step to upholding security is phishing your employees. Employers today can use services, such as PhishGuru or Simple Phishing Toolkit, to send phishing emails to employees in order to assess their ability to detect and react to malicious attacks. Employers are often surprised to discover through these exercises how easily information can leak out of their organization.
• Robust infrastructure.  Software developers should be closely integrated with IT officers. Standard logging practices should be established, and logs should be kept often, be centralized, rolled on a regular cadence, and never be left on an island. Log forensics is your best friend when you need to construct the crime scene. Furthermore, software developers should be familiar with firewall, routers, and application firewall procedures and settings during deployment, testing, remote access, and other aspects of their development process.
• Proper programming etiquettes. A bug caught during the development process is very cheap to fix (development and QA time), while a bug caught in the field can cost millions (service patches, recalls, etc.). To catch most of bugs during development (thus drive quality upstream), static analysis tools should be run against source code from the developer’s desk regularly. Post development, run-time verification tools should be run from QA’s desk to test functionality and gauge performance. Finally, prior to shipping the product, certification tests, if applicable, should be run to ensure proper protocols are followed. Alan Page, a colleague of mine from Microsoft published a book on how testing is done at Microsoft, which provides many more insights and tips on ensuring software quality.

I hope you and your CTOs find these tips will result in fewer restless nights … (well, at least until the next product release cycle).

Investor debate from the frontlines: Are we experiencing a FinTech bubble?

By Eric Minnick, Edison Ventures Associate

Recent outsized exits in financial services technology, such as the Vantiv-Mercury Payment Systems deal, are serving as a catalyst for more entrepreneurs entering the space.  This influx of talent and innovation makes it an exciting time to be investing in FinTech, but at the same time, raises the question, “Are we experiencing a FinTech bubble in today’s marketplace?”

Last week, the New Jersey Tech Council (NJTC) held its annual FinTech Conference, and there was a notable panel of an impressive cast of leading FinTech investors, moderated by Andy Gilbert, partner at DLA Piper:

Michael Kopelman, general partner, Edison Ventures

Mitchell Hollin, partner, LLR Partners

Amir Goldman, managing director, Susquehanna Growth Equity

Marc Lederman, co-founder and general partner, NewSpring Capital

 

This question of a FinTech bubble sparked great debate among the panel. The dynamics and perspectives at play can be summarized into four key points:

1. Per Kopelman and Hollin, the market is cyclical, but certain sectors are demanding higher valuations than others, due in part to improved public market conditions. Public markets are used to value many FinTech deals and are driving value up.
2. A “west coast mentality” seems to be creeping into east coast investing, meaning more money is chasing deals causing higher valuations.
3. Regulations are making certain market segments more attractive right now for investors.  Most specifically, compliance is a hot area to which companies are flocking.
4. Goldman asserted that the big guys (namely Google, Apple and Amazon) are looking for mobile payments companies and their presence will drive high valuations for VCs in those markets, and represent the opportunity for an extremely out-sized return.  Most of the panel pushed back on this assertion (“west coast mentality,” anyone?), as the reality is most of companies getting high valuations won’t be purchased by those big companies. The viewpoint expressed in opposition was one of more tempered expectations in that segment and hope for lower valuations and expectations.

While this panel has been investing far longer than I have, they shared perspectives and ideas consistent with what I’ve been hearing from entrepreneurs.  FinTech CEOs have high expectations for their companies’ direction and their exit potential.  The excitement is contagious, but makes it challenging to keep goals in perspective.  As the panel noted, the influence of players, such as Google and Apple, with plenty of cash and the propensity to spend is having a major impact on certain segments.  It will be fascinating to watch how their influence may impact future deals.

This FinTech bubble question is very relevant one with a couple of huge exits and outsized valuations.  There are a number of different explanations for why that is the case, from the improvement in the public sector through different buyers changing the landscape.  However, there is a lack of consensus as to whether this is a new status quo or just a market cycle.

Let me know what you think about the current trends in the FinTech market. Did the panel miss any key market dynamics?