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One of the inherent risks of investing in companies at the earliest stages is revenue diversification which in turn helps to create operating leverage.  Most startups we meet are dependent on just a few customers, partners, or channels for the bulk of their early growth.  Ideally, these early-stage companies are investing in the business to accelerate and diversify revenue streams.

If executed to perfection, revenues and gross margins are growing faster than operating costs, and operating income (or losses) are increasing (or decreasing) faster than both of them.

But without analyzing a few key metrics, it’s impossible to understand, much less create, operating leverage in the business.  Namely, it’s crucial to know how effectively you turn revenue to actual cash and the contribution margin of each product.

Accounts Receivable – How much cash is owed to you?

Accounts receivable is a great metric to use when validating if revenues are “real” or inflated.  When I use the word real, it’s in the context that the revenues will become cash in a timely manner.  Revenues can easily be inflated by shipping product where payment is not expected or will take a while to collect (more on that in a bit).  Rather on purpose or not, in these scenarios cash will be going down while profits are steady and accounts receivable are growing rapidly.

Book to Bill Ratio – How effective are you at turning bookings into real revenue?

Book to bill ratio is simple to calculate by dividing periodic bookings by the same period’s revenues. If bookings are a lot higher than revenues, that can be a positive sign. But it can also mean that your company is having a hard time getting revenue realized, i.e. you have a higher accounts receivable balance than the peers in your industry or at your stage.

Days Sales Outstanding – How effective are you at collecting revenue?

Another easy metric to calculate is days sales outstanding (ending AR/revenue per day) but instead of tracing how efficient you are at converting bookings, it measures how long it takes on average to collect from customers.  This number provides insights into where contracts can/should be re-negotiated and also the amount of cash needed to finance your business. One quick note, DSO is an average. For a more granular analysis, be sure to highlight AR under 30 days, 30-60 days, and 90+ days outstanding.  This will give you a weighted average which provides more insight into how well the company is actually collecting revenue.

Contribution Margin – Which products/channels are most efficient?

In short, the contribution margin is the window into how each product or channel individually affects the business as a whole. CM highlights what’s available after variable costs to cover fixed expenses and provide profit to your company.  It’s as simple as sales minus variable costs and shows the profit on what you sell before fixed costs.

Variable cost is the key factor in this equation – with revenue or channel concentration these numbers are easy to calculate, but with the diversification comes a new equation for each new product or acquisition channel.

Without understanding your CM by product and/or channel, it’s impossible to make informed decisions about where to invest capital for continued growth, the levers that need to be pulled (pricing, CAC, etc..) to make products more profitable, or if products/channels must be entirely eliminated.

This was a fairly long post full of accounting jargon, but it’s important to understand which metrics translate the effectiveness of the business in creating operating leverage.  As revenues diversify, these calculations become exponentially more complicated with the addition of new products, customers and acquisition channels.  Understanding and tracking them now ensures you’ll have a good grasp on where to allocate new capital when the time comes.


This week, behavioral economist Richard Thaler won the Nobel Prize in Economics. Thaler is best known for his work for disproving the traditional assumption that people make completely rational economic choices. If you’re a founder and not interested in behavioral economics, you should be.  A great place to start is Dan Ariely’s Predictably Irrational.

A few days ago, I mentioned the possibility of putting together a few posts on pitching and fundraising topics that are not covered as extensively as others. One particular topic that is often touched upon but, as evidenced by Thaler’s work, cannot be over-emphasized is the ability to demonstrate profoundly deep knowledge of your customer.

This capability is almost impossible to fake.  Either a founder speaks regularly to customers, both in-person and through data, or they do not.  Founders who have this deep knowledge are often able to easily speak to the customer behavior that is unique to their industry, and explain exactly which steps they took either with the product or the sales process to exploit these behaviors to the tune of traction.

A few real-world examples from startups include:

1) Understanding that in older, more entrenched industries a full technological leap may be unwanted or not possible.

There are a multitude of reasons this is the case, but the three that immediately come to mind are:  too risky from a financial or operations perspective, lacking the internal technical talent to implement or learn a new software, and the “that’s the way it’s always been done” mentality.  The quote below from Invenergy Future Fund partner John Tough perfectly sums up how founders should think about disrupting these industries.

No new technology solution is going to completely rip & replace existing software. Start-ups that expect to dramatically replace existing software architectures and make generalizations about weakness of existing solutions simply have not done their homework. @johnjtough

We’ve seen attempts to overcome these hurdles through slow-roll outs (note: slower revenue growth), taking increased responsibility for implementation (potentially higher costs), and inserting a human element into the process, think customer starts online but confirms via telephone (higher CAC).

Obviously, none of these options are ideal but are often necessary to gain traction within these legacy industries.

2) Learning that, much like B2C, in Enterprise SaaS it is still necessary to build for the end user.

Telling a visionary entrepreneur not to build the sleekest designed or most technologically advanced product possible seems counterintuitive. But, depending on your customer’s end user it could be the best possible strategy and a great way to conserve already constrained resources.  We came across this insight personally at Choose Energy on the B2C side and it recently surfaced again with a B2B startup with which we met.

Since I want to maintain the startup’s anonymity, I’ve made up this fictional example so please excuse me if it seems completely ridiculous on multiple levels.

Imagine building a software that optimizes call center or chat volume through algorithms based on inputs from the call-center agents themselves.  Who should the startup be building for?

My answer would be the call-center agents who are responsible for the inputs. The algorithm is only as good as the data it receives from the agents, who in most cases will be high school educated workers who are not interested in learning the newest technology but simply want to get the job done as efficiently as possible. A simple product that interrupts their workflows as minimally as possible is the way to go.

3) Adapting to a communication style that makes the customer more comfortable. 

Some new tech expressions can sound scary, especially to those in industries that have yet to be largely disrupted.

While phrases like “machine learning” and “artificial intelligence” can sound great in a deck or pitch meeting, potential customers often hear those words as the potential to remove the human element, i.e. them.

Another common phrase in the tech space is “cloud storage”, and while we think reliability and ease of use, some older industries think “unsecure storage.”

Founding teams who are exceptional at sales strike the right balance of communicating the value of their technology to management, get buy-in from those who the software will impact most, and make everyone comfortable during the process.

Knowing your customer is crucial in any business, but special founders are able to demonstrate unmatched insights into their customers.  More importantly, those founders turn these observations into distinct competitive advantages in sales, product, and marketing.

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I caught up with a friend yesterday who is an up-and-coming architect in the Austin area and it turns out we are facing a lot of the same challenges in launching a new venture.  We both are working to optimize processes in order to spend the most time possible on the core aspects of our firms.

During a 2016 shareholders meeting, Elon Musk said “We’ve realized that the true problem, the true difficulty and where the greatest potential is, is building the machine that builds the machine. In other words, building the factory.”  Similarly, Homebrew’s Hunter Walk has been quoted as saying “the company is the first product, and you have to be really intentional about how you build it before it’s ready to scale.”

This highlights an important reality of building a great company or product: the processes and frameworks put into place will often decide the level of success achieved and those operational components should be designed with the end-goal in mind. As my partner Jonathan recently wrote, the best of the best almost always “perform the common uncommonly well.”

1) Start EarlyThe larger a company grows, the more difficult it becomes to put processes in place.  This one is straightforward, as a startup begins to scale it becomes exponentially harder to move everyone in the same direction.  Getting a group of 10 engineers to agree on a product development methodology is easier than asking 40 to do the same and infinitely easier than asking a team of 100 or more.  This isn’t just an engineering or product problem, the same rules apply to marketing, finance, and sales. Bonus: it will make cross-functional execution that much easier.

2) Overly-Simplify: The best early-stage companies have an innate ability to focus when it is most difficult to do so.  Early-on, startups are vulnerable to chasing shiny objects as everything feels like a big opportunity.  Instead, avoid temptation and focus on executing toward one core product or market.  Example tactics to accomplish this include: shorter meetings (i.e. standups), picking 2-3 metrics that are core to success (ex. contribution margin and conversion), and selecting 1-2 strategic priorities per timeframe.

3) Scrutinize: Be honest with yourself.  One of the most effective practices I’ve seen teams use is the agile concept of a retrospective.  This gives teams the chance to discuss what’s working, what isn’t and ideas for improvement.  The most crucial element to this step is accountability, without it, these meetings don’t help move the company forward but instead become chances to be overly critical without inspiring action.  Begin each “retro” with a review of how well the team executed on previous takeaways and keep score.

Operations within early-stage companies often get overlooked as there are more exciting challenges to tackle.  When processes are in place, no one notices because things are running smoothly and challenges do not begin to surface until later in the game. However, neglecting them is akin to puncturing a boat while it is still in port; it may leave the dock, but it won’t make the entire trip.

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Nothing is more critical to a growing startup than pricing strategy, and all too often startups leave too much money on the table by not charging enough. This makes it difficult to take full advantage of the new value their product creates.  As Marc Andreessen recently said, if he could put one phrase on a billboard in Silicon Valley it would be “raise prices.”

My hypothesis on why startups currently have an issue with pricing is the recent (but now seemingly over) period of apathy towards negative margin growth. It conditioned startups to capture as much of a market as possible without thinking deeply, or at all, about pricing. While this gets a product into the hands of users, it does leave open the question of what buyers are willing to pay for it.

To answer this question, it’s useful to turn to Econ 101’s first lesson – supply and demand – and more specifically, consumer surplus.  Why is consumer surplus good?  For one, you always want your customers to feel as though they are getting a deal.  More importantly, it becomes possible to leverage that feeling to push out the demand curve for the core product, which is what any business really wants to accomplish.


Free or discounted complementary goods increase consumer surplus while shifting the demand curve

While perhaps unintuitive, one of the best ways to do this is by “giving away” complementary products or features.  The result pushes out the demand curve for the core product, selling more at a higher price, while simultaneously increasing the consumer’s perceived value (consumer surplus).

It’s easy to see the effect of this strategy in two of the most popular technology business models: Enterprise SaaS and Marketplaces.

  • Enterprise SaaS – Much like iOS and Android, Salesforce has an app store called the AppExchange. Consumers aren’t charged for access to the apps but instead the large selection combined with easy integration of popular applications pushes out the core product’s demand curve, allowing them to charge more than would otherwise be possible for the core product.
  • Marketplaces – There’s a reason almost every successful customer acquisition platform has a “tools” or “analytics” section on the selling side of the marketplace, the goal is help the
    supply side sell more.  Charging $10 for add-ons such as a pricing tool makes little sense in this case because the value is hard to quantify for a seller.  Yet, introducing it for free then subsequently raising the customer acquisition (i.e. booking or listing) fee by a few percentage points has little effect on diminishing the over supply.

Finally, it’s important to address the 800 lb. gorilla in the room: Amazon Prime.  Amazon has leveraged discounts on services that may seem arbitrary but actually create a large consumer surplus for the core product. Let’s take a look at a few of the discounts offered to Prime members on ancillary services.

Amazon Music Unlimited: $9.99 non-prime / $7.99 Prime

Amazon Digital Storage: (100 GB): $11.99 non-prime / 5GB and all photos free for Prime

Amazon Audible Channels: $60 non-prime / free with Prime

By including discounts on these complementary goods, Amazon has increased the demand (i.e. pushed out the curve) for Prime.  Furthermore, the consumer surplus created by including these complementary goods is less than the increase in unit marginal cost for Prime’s main service, faster shipping.

The next time you are thinking about your product pricing strategy, take it from these tech behemoths: it’s not only what you charge, it’s what you give away too.

Special thanks to Jonathan Crowder for helping me think through this post.

Since our work is primarily focused in areas where the startup ecosystems are just beginning to grow, we often get questions that have been answered by more veteran investors or founders in more established markets.  Inspired by John Gannon’s blog and instead of finding them one-by-one in my bookmarks, I’ve decided to start compiling them here in order to make sharing easier.

The resources I post are ones that have helped me throughout my career or have been recommended several times over by established founders or VC’s.  Much like John’s blog above, I’ve posted resources that are also geared to VC only because it’s impossible to sell to anyone whom you don’t understand well.

If I am missing anything or you’ve found a resource you’d like me to add please comment below. I’ll be editing the list regularly as I come across interesting content and subtract the outdated ones.

Must Read Books

Venture Deals by Brad Feld – considered by most to be the bible of startup fundraising

The Hard Thing About Hard Things by Ben Horowitz – a16z partner and co-founder Ben Horowitz discusses the ups and downs of running a business

Founders at Work by Jessica Livingston– a collection of stories about the day-to-day activities of startup founders

Venture Capitalists at Work by Tarang and Sheetal Shah – a collection of stories about the day-to-day activities of venture capital investors

The Lean Startup by Eric Reis – the book that codified running a startup in a way that is nimble and able to learn from customer feedback quickly

Shoe Dog by Phil Knight – memoir of Nike founder Phil Knight, a story of pure hustle and perseverance

The Business of Venture Capital by Mahendra Ramsinghani – similar to Venture Deals, but more in-depth (Brad Feld wrote the foreward)

Deep Work by Cal Newport– strategies about how to focus your day and keep control of your schedule, very important for anyone who will be pulled in a million directions

High Output Management by Andy Grove – considered the Silicon Valley handbook for organizing, directing, and developing employees

Zero to One by Peter Thiel – the PayPal and Palantir co-founder discusses how to create enough value and more importantly how to capture it

Contagious by Jonah Berger – how do you make things catch on and go viral? Berger takes a systematic approach to the process of virality

The Outsiders by William Thorndike – 8 different stories on CEO’s who were great at capital allocation using rational blueprints

Predictably Irrational by Dan Ariely – insights on behavioral economics and consumer tendencies

The Everything Store by Brad Stone – the story of Amazon’s creation and what makes it great

Creativity Inc by Ed Catamull – leadership book by former Pixar CEO whom Steve Jobs credited with his growth as an executive

 *full transparency, the links for books are affiliate links from Amazon*


Blogs / Medium Posts

HaystackVC – Semil shares why he made each investment + several interesting insights on markets outside the Bay Area

Fred Wilson’s MBA Mondays hint: you should be reading Fred every day, but this particular tag discusses everything from fundraising, hiring, strategy, etc..

Elizabeth Yin – one of my favorite blogs, Elizabeth does an amazing job with transparency from all angles of the startup world

Feld Thoughts – author of Venture Deals, Brad has been investing since 1987. Look for a lot of thoughts on the mind of great founders and what questions they should consider

Above the Crowd – Bill Gurley is one of the best VC’s ever, and THE resource if you are building anything marketplace related

50 Things I’ve Learned About Product Management – how you manage a product, and the product that makes the product matters

John Tough – my mentor, Chicago based, great perspectives on the Midwest and the path from VC to operator and now back to VC

Thomas Tunguz – data-driven approach to issues facing startups, from product to fundraising and everything in-between

Hunter Walk – VC at Homebrew, previously a Product Manager at Google where he led YouTube, great perspectives from an operator turned VC

First Round Review – one of the best, if not the best, seed stage investors in the country takes a look at management, fundraising, product and other topics from an operational viewpoint


Fundraising / Pitch Decks

Alexander Jarvis Pitch Deck Collection – widely considered the original pitch deck guide with the biggest collection assembled

Dconstrct– company looking to build upon Jarvis’ work to create a searchable database of pitch decks

Why You Should Have a Data Room – the team at Kiddar Capital looks at why you need a data room for fundraising and what should go into it

How We Raised $7M from Foundry – Adam Healey, CEO of Borrowed & Blue provides a 7-step guide to fundraising from a major VC

First Round Review – Fundraising – the fundraising section of First Round’s blog above

Great Story = Great Pitch – all great pitches are actually great stories, it’s not only about what you do but it’s why you do it and why it’s important that counts

Getting Your Head in the Fundraising Game – Mark Suster from Both Sides of the Table offers 10 tips on how to be a more effective fundraiser. His blog is another great resource.

How to Communicate with Investors – Reza Khadjavi, CEO of Shoelace walks founders through the process of taking dots and turning them into a trend line.  A great, execution focused look at raising capital

Font Series A Deck – Mathilde Collin, co-founder and CEO of Front, shares their series A deck, a few thoughts on the process and best of all critiques her own deck


Business Models / Strategy

Financial Modeling For Startups: The Spreadsheet That Made Us Profitable – provides a great starting point for building a financial model and even better it’s one that comes with an execution story behind it

Metrics that Matter – Part 1 – Jeff Jordan, Anu Hariharan, Frank Chen, and Preethi Kasireddy provide 16 (and then 16 more) metrics that matter for growing startups.  It’s impossible to raise if you don’t know which of these metrics are important to your business and how you are going to improve upon them.

Metrics that Matter – Part 2 – a continuation of part 1

How to Analyze Your Startup – Tunguz takes a look at how to evaluate your startup from a VC’s perspective. Additionally, he’s right, frameworks rule:

Product Canvas

Business Model Canvas

Porter’s Five Forces



This Week in Startups – Jason is one of the first investors in Uber and got his start as a VC scout.  His new book is Angel.  And as the podcast description says, “Need strategies for improving your business of motivating your team? Just want to catch up on what’s happening in Silicon Valley and beyond? Your journey begins here.”

Masters of Scale – Silicon Valley investor / entrepreneur Reid Hoffman tests his theories of growth with famous founders.  Hoffman is most well-known for PayPal and LinkedIn.

The Pitch – A show where real entrepreneurs pitch to real investors—for real money.  If you are going to pitch investors there is only one way to learn, by doing.  But this show is a close second.

The Official Saastr Podcast – Jason Lemkin and Harry Stebbings host operators from various SaaS companies focusing on scale and hiring. They host the occasional investor as well where the focus turns to the metrics that matter for capital raising.

The Twenty Minute VC – Venture capital’s youngest star, Harry Stebbings, interviews VC’s from across the country.  Here you learn what VCs are focused on, how they invest, and the traits that make entrepreneurs succeed or fail. You can also find Harry at Mojito VC.

a16z – a16z’s partners discuss the biggest trends in tech with industry experts, business leaders, and other interesting thinkers and voices from around the world.

Other Important Resources

Y Combinator – the original Startup Library with tons of great resources dating back to 2008

Crunchbase – easy and free place investors often glance at to check high level business info

Angel List – you should absolutely have one for recruiting and fundraising

Product Hunt – great place to get your product featured at launch


Recently, I decided to take a “themed” approach to my book selections.  The first theme has been centered around a new approach to my work habits.  I asked myself three questions (selected book):

  1. How can I learn more effectively and efficiently? (Make It Stick)
  2. How can I spend time in a deeper state of concentration so the most important tasks always get my best work? (Deep Work)
  3. How can I prioritize my day around getting the most important tasks done? I.e. owning my schedule instead of letting it own me. (Essentialism -thanks, JT)

As I engaged with these books and started applying their lessons to my day-to-day workflow, I wondered where else could their principles be applied in a startup setting.  For the latter two books, the answer soon became clear, meetings.

Why do some teams leave meetings without accomplishing their goals and how can they apply the theses of the books above in order to walk away from meetings feeling ready to execute?

Deep Work = (Time Worked x Intensity of Work) – Distractions

How many meetings have you been in that include a “brainstorming” session? The validity of brainstorming has come into question in recent years due to the increased propensity for social-loafing, regression to the mean, and production blocking.  While brainstorming is meant to increase creativity, we are actually at our most creative when our work is done in solitude.

Without great solitude no serious work is possible. – Picasso

Instead of asking everyone to express several ideas all at once, encourage (or perhaps require) members of the meeting to spend 1-2 hours beforehand working through the topic of the meeting individually in order to allow them to achieve a state of deep work on the problem at hand.  The results will be of higher quality and buy-in can still be achieved since everyone will have something to contribute during the meeting.

Essentialism = Less but Better

While leaving any meeting with a plan of attack is a must, it is a partial completion of the actual requirement.  Great meetings end with a prioritized list of to-dos and deadlines.  We all have the tendency to want “more” and to chase shiny objects.  This is especially true early on in a company’s life when there are many things to do.

However, leaving a meeting with ten top priorities is, as Greg McKeown puts it, “ironic.” Make it a practice to prioritize what can be accomplished in the time period given.  In my experience the following limits have worked well:

  • Quarterly: 3-4 priorities
  • Monthly: 2-3
  • Bi-Weekly: 1-2

Additionally, encourage your team to say “no” when they feel overwhelmed or that a task is unimportant to the greater goal at hand.  Healthy debate will lead to an even clearer list of priorities on which to execute.

Leaving a meeting with no clear direction (decision maker, execution plan, priorities) is one of the biggest wastes of company resources imaginable. We often think about tangible costs but almost never compute the costs of pulling multiple team-members into an hours long meeting.  If you’re having the issue of multiple, yet unproductive, meetings I encourage you to try some of these tactics geared toward the individual to make your group sessions more effective.

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“You get what you measure.” A concept that seems simple enough, yet even the world’s best businesses get wrong.  Measuring the wrong things drives poor decision making and undermines performance.  Simply put, using a metric the wrong way is as bad or worse than not measuring anything at all.

Let’s take a look at a few metrics that are useful when assessing the health of a startup but might not always be what they seem from an operational perspective.  Before we begin, it’s important to note that these are just examples, and each metric is worthy of a deep dive.  For our purposes, we are just looking to highlight a few metrics that can be perilous if other factors are not taken into consideration.

Customer Lifetime Value (CLV or LTV)

What it actually measures: Effectiveness of acquisition channels or marketing programs to acquire similar customers

How it’s misused: Comparing the cost of customer acquisition with the cash flows that come from the customer over time, often mistaken as the margin made on a customer and relaxing the drive for near-term profit.  Lifetime value is extremely useful, but should be used in combined with metrics like payback period to ensure a startup won’t have to choose between cash flow and growth.

What can go wrong: CLV doesn’t account for revenue timing, i.e. cash flow implications for SaaS businesses. It is inherently uncertain via discount rates and attrition which imply assumptions about future market conditions . If LTV > cost of acquisition, many will justify “pouring gas on the fire”

Let’s take an example. A customer costs you $50 to acquire and pays you $4.99 on a monthly subscription, it will take over 10 months to breakeven on this customer leaving a lot of time for uncertainty. Even if the customer stays, it will take 13 months to make 30% margin on just the cost of acquisition which doesn’t account for the overhead of the business itself.  The other issue to consider here is supply and demand. As you work to buy more customers, the price will go up and the payback period will be pushed out. It’s highly unlikely to get more efficient the more you spend, typically the outcome is the opposite due to competition and the removal of first adopters which are always cheapest to acquire.


What it actually measures: Churn can be measured in two ways, customer churn or revenue churn.  For the purposes of this post we’re looking at churn as the percent of customers lost monthly.  It is inherently a measure of customer satisfaction and a startup’s ability to retain customers through renewal campaigns.

How it’s misused:  A startup focuses only on the percent of churn instead of combining the measure with the rate of new customer acquisition.  Instead of looking at the percent of churn, it becomes important to look at the actual number of customers lost.  When % churn stays steady, there becomes a point where customers acquired = customers lost and growth slows to a halt.

What can go wrong: Startups recognize the problem too late.  As the number of customers churned grows, two things happen.  First, the cost to retain becomes high through marketing spend and /or operational overhead to put systems in place for retention.   Second, the cost to acquire new customers to replace the churn AND grow becomes burdensome at scale.

Let’s use an overly simple example, last year a startup acquired 5,000 customers at a $100 CPA for a total of $500,000 spent.  This year it needs to grow year over year 70% to 8,500 customers acquired for this year and a goal of 13,500 total customers under contract.

Assuming the CPA stays constant (remember from the CLV discussion this is unlikely), new customer acquisition will cost $850,000 to reach the goal of 13,500 under contract. But what happens when 20% of last year’s customers churn? Now, we have 1,000 less customers and need 9,500 to meet our goal meaning we’ll spend an extra $100,000 to meet our growth numbers.

To drive the point home even further, here is an extreme example.  This week Facebook announced it has 1.23B daily active users as of December 2016.  If they churned 0.5% of users in January 2017, they would lose 6.1M users.

This concept seems simple enough (we use compounding interest in finance all the time), but as a startup focuses on growth and scale it is easy to forget about churn.  The goal is optimal net customer growth, the optimal spend of acquiring new customers and the reduction of churn.


What it actually measures: In its simplest form, revenue is the income a business receives from operating activities, but like most things it is much more complicated in practice.  For our purposes, revenue can actually be divided into three parts: booked revenue, recognized revenue and collected revenue. These three are often referred to as the flow of revenue.  Depending on the business, booked revenues can be realized and collected immediately or spread out over a period of time.

How it’s misused:   It is perfectly fair to champion “bookings,” “annual recurring revenue” and other numbers that often exceed actual revenue, as defined by generally accepted accounting principles because they are often better indicators of a companies growth prospects.  However, monitoring the flow of revenue becomes just as important as a startup grows. Startups should dedicate as much attention to the rate, both time and frequency, at which they are collecting revenue as they do to booked and realized revenue.

What can go wrong: The (un)realization of revenue. In some industries, bookings do not always turn into revenues. Marketplaces are one such example of an industry where bookings are often materially different than realized revenue. The marketplace doesn’t actually realize revenue upon signup or booking, but instead is compensated when the customer uses the actual service.

If your business is booking revenue at a high rate, but not collecting it you’ll be carrying a high accounts receivable balance and hinder your cash flow.  In this case, yield becomes an important indicator of performance. While this is just one example across one particular type of business, revenues / cash flow are the lifeblood of any business so it’s critical revenues are measured the right way.



Over the past month, I’ve focused on my growth in product during the span of the last few years. This led me to reflect on my initial days as a product marketing manager and internalize where we succeeded but also what we could have done better. From those thoughts, I’ve tried to put together a basic framework for mitigating risk in those formative days, weeks, and months.

These ideas are certainly not definitive or complete but I do hope it provides a relatively good structure for your initial thoughts about your product or business. The journey of product building only increases in complexity the further you get from day 1, having a process early creates habits that pay dividends in the long run.

Frame the problem

Fall in love with the problem, not the solution. Research it, talk to users, and become immersed in the problem before building the solution. It’s impossible to build a good product if you don’t understand what problem you are trying to solve. However, just like in economics there is a diminishing point of return on data and research. Nothing replaces feedback from the market.

When founders have an empathetic understanding of a market and they are connected to the problems they are solving, it’s a more ‘mature’ approach to a starting a startup. People tend to forget that your company is your first product, and you have to be intentional about building your company before it’s ready to really grow and scale. — Hunter Walk

Whether the problem is lack of energy choice, expensive diagnosis of a chronic illness, or unacceptable access to higher education, your solution to the problem will change over time. Yet, the product will only succeed if it solves a real problem for its users.

While admittedly a bit biased, this is where the best product managers are able to leverage extensive industry / business knowledge. It is important to have a grasp on which markets will be best for the initial launch, the partnerships that could allow for rapid expansion after traction, and the message that will resonate with customers.

Speaking of messaging, never underestimate the power of storytelling. Whether you are looking for users or investors, the product should be easy to understand and resonate with your audience. Empathize with the needs of the customer and show them you solve their problem.

Sometimes the product canvas is messy

Execute the go-to-market

If real estate is all about location, the go-to-market is all about execution.
Once you’ve researched the problem, it’s crucial to put a timeline in place for getting the product to market quickly.

Simply put, great execution is entering to market in the shortest amount of time possible with a minimal product that solves the problem. As my teammate Jonathan Crowder likes to say, “viable” is part of MVP. Bad execution is a lack of speed to market and inability to apply learnings from market once it has launched.

To achieve the necessary speed in our go-to-market, we broke up the B2B product launch into small sprints. Our goal was to get into the market as soon as possible. As a marketplace in a highly regulated space we looked for a market where the regulation was lowest and where we could generate the supply-side quickly.

Another criteria which we held in high regard for prospective partners (the supply) was the ability to service other markets quickly when we expanded. This strategy paid off almost immediately as the demand for the marketplace exceeded our early expectations and we were able to quickly answer the demand in additional markets where the completion was low.

On that note, if you are fortunate enough to gain traction it is important to understand why. Don’t over celebrate the early returns. This lack of understanding led me to champion a few features that eventually were built and not needed. Which leads me to….

Measure and evolve

The power of incentives and unintended consequences have always influenced my strategic business decision making. I firmly believe that what you measure determines the actions you’ll take and those actions will effect something you don’t anticipate.

It’s important to define these metrics before hand, otherwise you’ll shape them to your narrative or change them to ones that shed your product in a more favorable light.

A little over a year ago, the team at Andreessen Horowitz published two blog posts on startup metrics (32 metrics total; part 1 and part 2) that everyone looking to start or run a company should read. Here are the ones specific to product:
Active Users
M-O-M Growth (if you have a seasonal business, Y-o-Y is just as important)
REVENUE (per user, repeat customers, margins are all critical)

It’s likely that one, or all of these metrics will shed light on issues with your product / business along the way. The important part is working feverishly to improve them as quickly as possible, don’t prolong the problem by refusing to accept the results.

When beginning to improve the product, don’t fall into the trap of making too many changes to the baseline user path at once. Early on it’s likely you have too few resources to measure and then act upon several changes immediately. Focus on the changes you believe will impact your metrics.

As you scale, your capacity for complexity grows but be aware, the increase in infrastructure will tease you to attempt to make more changes than can be accurately assessed resulting in assumptions that might not be true. Adding complexity too quickly often keeps products from success.

There’s no 100% right way to build or launch a product. However, having a repeatable problem solving structure is important for achieving the desired results at scale. Pick a strategy that will allow you to remove emotion from the process and make decisions that are objective and rooted in data. Stay grounded in this approach and the results will follow.

A few days ago, I posted a few of the resources I used as I grew into the product marketing manager / product manager role. With this post, I’m focusing on the things that you won’t read in those books but will likely learn on the job. Being a product marketing manager or product manager is always glorified on podcasts, blogs and in books. However, the path to success is often an exercise in your tolerance for being wrong and your willingness to listen.

Stop, Collaborate, and Listen

Are functions dependent on engineering asking you about the roadmap frequently? If so, it’s possible you’ve made the product roadmap a blackhole. Good product managers clearly and frequently communicate about the product roadmap. Great product managers go one step further and build shared understanding about the trade-offs that have to be made on an ongoing basis.

It’s important to remember that you are the gatekeeper to a finite resource within the company, one that several of your teammates need to achieve their goals or execute on their strategies. Approaching this responsibility with the humility it deserves will go a long way to ensure everyone is on the same page. Ask yourself, if someone has a better thought, would you know?

Product managers will often comment that they “own the product vision”, I couldn’t disagree more. The PM is responsible for executing it and building the vision with everyone in mind. The entire team should be proud of the product the company releases to the market. I’ve always been a fan of healthy internal debate. But while debate is good, buy-in is better.

You Can’t Be a Perfectionist

Scope creep is real. If everything you do must always be 100% complete and perfect before you release it, product management isn’t right for you. Customers will always provide the biggest insight into improving your product. The longer you wait to release it, the longer you have to wait for feedback. In businesses where cash flow and runway are key, this can prove disastrous.

Instead, put a process in place early. Keeping to a two week sprint cycle might seem rudimentary but the habit will ensure that you are keeping accountability and progressing toward a better product on an ongoing basis.

Even when we are working on longer term projects with revenue impacts we’re committed to releasing something that will give us a positive outcome in the near-term. Not only is this important for business reasons, it allows us to always collect customer feedback to improve our product. Additionally, the engineering team gets a chance to impact the business regularly with new features. Never underestimate the importance of this, engineers LOVE knowing they are building products that have an impact on the top line.

Shiny Objects Almost Always Fade

There’s a time in every company where the path to explosive growth seems hidden or the initial push has slowed. At LAUNCH this year, Jason M. Lemkin warned SaaS companies that it is tempting to enter a new segment with your product when you hit the wall.

We aren’t SaaS at Choose, but I do believe every company eventually faces the decision to improve the core business or enter a new segment. It’s likely you have plenty of room to continue to improve the core even if it isn’t exciting. Focus on your mission and take a deep dive into what your customers want. Scott Belsky of Benchmark uses a phrase I love, “mission centric, medium agnostic.”

As much as we wanted to be a “purely digital” platform for energy choice, some consumers needed the comfort of a voice on the telephone. Our mission is energy choice for all because we believe it saves customers money and allows them to pick the source of their energy, should we care if they do this online or on the phone?

As it turns out, a great shopping platform combined with industry leading selection is an avenue to success once we gave customers a choice in the way they transacted. Focus on your customers, not what other companies in different industries are doing with the “latest tech”.

Execution is a Sprint, Vision is a Marathon

We have a strict rule at Choose, once a sprint starts, it doesn’t get changed. However, that doesn’t apply to the day before the sprint or the quarterly roadmap.

Your goal as a PM should always be to execute on the highest value features, this changes frequently, especially in startups. However, being adaptive doesn’t come without its traps. It is easy to be coerced into creating throw-away work.

Recently, we had to make the decision on which core piece of our product we wanted to improve first. We subscribe to the Bill Gurley theory that conversion is the most important metric, and with this in mind decided to improve the checkout process for our customers. This was a massive undertaking, so we broke it into actionable pieces.

First, we focused on changing the validation scripts and content. The sprint, easy fixes that would have immediate impacts. Due to the nature of our business, each checkout has idiosyncrasies that dictate they all have slightly differing code leading us to the marathon. We improved the code base to allow us to be more performant and flexible with improvements. The result: we’ve reduced the time to add new features in checkout by about 66%, and improved conversion by ~20% after customers enter checkout.

You’re Going to Be Wrong

Know this, building the right product is hard. If you’re doing it right, and moving fast you will be wrong a lot. It’s what you learn and how fast you adapt that determines how successful you’ll ultimately be.

After we had launched our B2B product at Choose Energy, I was damn sure we needed to build two things: 1) an input for our customers to enter their monthly electricity spend to get a better price and 2) a way for our partners who weren’t on API’s to upload prices more quickly. I pushed for these almost every chance I got. Neither worked and I’d wasted our engineers’ time. I was certain that customers valued price above all else and this was our way to give them the most savings. As it turned out, they valued their time more.

Instead, our customers enjoyed the simplicity of just selecting home, small business, or large business and seeing prices immediately after. Our partners didn’t put out more tailored rates because the new upload features weren’t a vast improvement on our old process nor did they increase acquisition.

Don’t be afraid to admit mistakes, the sooner you admit them, the faster you can correct them and build something your customers love. Even more, don’t be afraid to make mistakes. 80% certainty is almost always good enough, driving out all uncertainty tends to waste a lot of time and speed matters.

There you have it, a few skills I’ve learned on the job in product and the experiences that go along with them. You might have noticed there are two skills noticeably absent from the list. HUSTLE & CURIOSITY. Simply because I believe you need those skills to excel no matter the job, and they’re hard to teach. I hope this list leaves you with a few skills you can apply to your day-to-day basis and as always, if you have more to add, I’d love to hear it.

Last week, I introduced a series which I hope will be of use to new product managers in markets outside of Silicon Valley. For the first installment I am focusing on a few resources that really shaped my view of product management over the last three years.

Udemy (Coursera, EdX, Khan Academy)

Silicon Valley is full of classes for aspiring PM’s or PM’s who are looking to reach new heights in their careers. I work in Dallas where the cupboard of resources for true product management courses is bare and courses are focused mostly on young developers learning to code.

A few years ago, I made the decision that having a few PM / coding skills would come in handy down the road and enrolled in a few classes on popular online learning marketplace Udemy. Coursera, EdX (I took CS 101 from Harvard here), Codecademy and Khan Academy all provide free or low cost classes for anyone looking to learn a new skill.

I wanted to focus on a few coding languages and a high level overview of web development.  Below is my Udemy curriculum with a synopsis of each course.

The Complete Web Developer Course — Build 14 Websites: This was the first class I tackled upon enrolling in online courses and was a great entry point for someone with limited knowledge of website tech stacks. This 10 section class spans 245 lessons and covers intros to HTML5, CSS, JS, jQuery, WordPress, PHP, SQL, and API’s (including Google Maps’ and Twitter’s APIs). Additionally, you’ll learn how to setup an FTP to send files to and from a sample website you build early on in the course. This class won’t dig deep on any topic, but after it I felt a rudimentary understanding of how web development works at a high level.

The Ultimate Excel Programer Course: I know, I know, no one programs in Excel anymore but hear me out. For anyone who has never coded before, and three years ago this was me, programming macros in Excel is a great starting point for two reasons. The first, VB in Excel corrects your syntax and makes it obvious where your code is broken. There’s even in a function that allows you to run through your code step by step which not only allows you to correct it easily but shows you exactly which lines of code correspond to action. The second, learning a language with assistance was invaluable when I moved to languages like R, Python, and SQL. Suddenly, coding didn’t seem so unfamiliar anymore.

The Ultimate Python Programming Tutorial— This course was my first into to common programming terms like strings, boolean, and lists. However, I had learned some terms like loops and else in the Excel programming class above. This course focuses on the basics of Python, a great language especially for data applications. The most useful skill in this class is learning to define and call functions through out your code. Something that proves useful if you are running the models consistently with the same variables.

Applied Data Science with R — Full disclosure, I am a stats junkie. It was my favorite class in grad school and I continue to love it. Just knowing how to run and interpret regressions the right way is an immeasurable skill. This course will walk you through some basics in the R language and a few key concepts in statistics (though I’d recommend a full course on stats if you’ve never taken one). R is a powerful tool for statistics and having even a minimal grasp on it will allow you to run models and explain them with ease given the vast amount of packages available in the R library. Think of R as a multitool in your pocket.

Note: while I did not take a class on it, I highly recommend anyone looking to be a PM learn SQL. I was lucky enough to have a colleague teach me the basics and then I expanded on my knowledge through YouTube, Stack Overflow, and other online resources.


One great thing about product management is that due to its immense popularity as a career path, there are a plethora of books from which to choose. Here are a few of my favorites:

Hooked, Contagious, Inspired: I placed these books in the same category because they all have different approaches on how to create and implement products people love and how those products gain traction. Hooked focuses on how to build products that consumers will use repeatedly while Contagious turns its attention to methods that are used to get ideas and products to catch on. The combo is powerful: how to build habit-forming products and how to spread the word. Inspired takes a slightly different approach focusing on how to decide which product opportunities fit best with your mission, how to implement Agile once you’ve decided how to move forward and how to manage expectations / goals of management.

Agile Product Management with Scrum (short form of Essential Scrum): This book is the resource for learning Agile at a high level and provides best practices for implementation. There are two versions here, the first which while shorter still provides valuable techniques for organizing your product team and the second which is the long-form for more granular learning. This book is most similar to a text book and should be required reading for anyone getting into the field. It’s likely you won’t stick to the techniques word for word but they do provide a framework for product strategy.

The Lean Startup: This is the quintessential product read for PM’s in startups and for good reason. As you develop a product and companies grow, the natural inclination is to make the product and process that goes along with building it more complex. Eliminating a focus on simplicity and clarity of vision is common. This book will keep you focused on moving quickly based on data insights.

Podcasts / Blogs

One of the traits that I believe helped me quickly evolve as a PM is being highly curious. This took a few different forms; 1) don’t be afraid to take inspiration from your competition or products that do things really well. There are sites that collect product inspiration, use them! 2) Listen to really smart people who’ve already accomplished the goals you wish to achieve. Much like product being a popular topic for books, it is also the foundation for many popular sites and podcasts since most founders are indeed product focused.

Product Hunt (site and podcasts): The reason for using PH is simple, great people posting great products on the site, and great people discussing great product on the podcast. Want to see what’s coming next? Visit the website. Want to hear from successful product owners and founders. Listen to the podcast. (Note: they haven’t posted a podcast in a few months, but the previous ones are still amazing)

Little Big Details: A fun website that posts unique, and sometimes hidden details that make a big difference in UI / UX. Most of these insights come from companies you might have heard of like Apple, Amazon, and Google.

This Week in Startups: It’s no secret that jason has one of the best podcasts in Silicon Valley and for PM’s it is a must listen. The great founders that visit this podcast often, share how they solved their biggest product issues from all aspects including ideation, implementation, and the strategy behind it all. Even if you don’t hear a product insight on an episode, there’s no doubt you’ll learn something about startups that you can relate to or use in your day-to-day.

This Is Product Management: This is Product Management is a podcast about a variety of topics and where they intersect with product management ideas. Past topics have included, IoT, APIs, Venture Capital, and storytelling. The diversity of topics will broaden the way you think about product strategy and what outside forces shape it.

Silicon Valley Product Group: Marty Cagen (author of Inspired mentioned above) and Chris Jones post once or twice a month on all aspects of product management. This is a must read for a variety of reasons but among my favorite is the breadth of topics on the blog. Marty and Chris write on product, product leadership, diversity in product, strategy, vision, and much much more. This isn’t just a good read for product mangers but for those who manage or work extensively with them as well.

The availability of resources for aspiring and evolving product mangers is immense. I’ve selected a few that really guided me during those first few years where I felt a bit underwater at times. I would love to hear from you and any resources you’ve found valuable on your journey as a product manager.

The next part of this series will focus on a few skills these resources don’t teach. Next, we’ll move on to leveraging both industry knowledge and business acumen to guide product strategy. Finally, I’ll put it all together with a timeline of how I approached product management from being a complete novice to only slightly green after learning from these resources and mistakes I made along the way.

This past week, our CRO John Tough provoked a conversation over email about our success at Choose Energy and he’d noted a change in our culture over the last few months.

Culture is something which had always been top of mind for us, but lately something had been clicking. As any good leader does, John often pushes me to think deeper about trends within the business and asked me to think about why “culture” never comes up in our conversations anymore, was it overrated or was it now engrained in our company?
I am a huge believer in culture, mission, and values as a company so my answer as the latter. Below are a few quick thoughts what makes for a quick transformation from average / non-existant culture to great culture.

Early hiring is crucial and eliminate bad culture swiftly and ruthlessly

Great culture begins with the very first hire. I know you’ve likely read this cliche over and over again but there’s a reason. Think about this, your first hire likely hires 3–7 people, those 3–7 people hire at least 1–2 people and so on. If the first hire poisons the well, it could be poisoned until the very last person on that hiring tree is let go. Which leads me to this, hiring early is CRUCIAL.

If early and new hires do not exhibit core values and dedication to the mission they must be let go quickly, if no action is taken it’s likely one of two things will happen: 1)since bad culture is evident, the employee is promoted because they “have been there the longest” putting them in position to influence other employees and their new hires, and setting the expectation that time = value, 2) the employee isn’t promoted but believes they should be only based on their “time served” and begins to spread the word inside the company that “hard-work” isn’t appreciated or rewarded. Both terrible outcomes that compound an initial mistake. Take action, remove bad apples as it is likely they are just as unhappy at work as you are with their performance.

If you are constantly talking about culture, it’s likely because you believe it’s not there

Think about your goals as an individual. Do think about your big core values and mission everyday? Or is it a subconscious effort to take action based on them? For me, it’s the latter, I know the values and goals that drive my decision making are but I don’t repeat them to everyone I know over and over. Instead, I work on taking action towards them then evaluate periodically for progress.

Companies should be very similar, core values are great but if you are hiring people who truly believe in them they are not something that must be repeated everyday. Instead, those people will set quarterly goals that are set in your mission and act on them accordingly.

Establish one main, clear goal and march towards it with every action, rather than words

Speaking of action, it is ALWAYS the number one driver of company culture. It’s easy to hang a poster that lists something like “we put customers first, be relentless, be resourceful, have a sense of humor” etc… But what actions are your leaders taking to show employees they live these values?

Establishing one clear goal can help companies with culture problems begin to build one they can be proud of. For example, if you set a goal of profitability as some startups have been lately, pick a metric that you believe drives towards that goal. We’ve done something similar with conversion on our product team because it lowers CPC and improves revenue both leading to better unit economics.

We took action immediately on this goal, posting a real-time metrics board in the center of the office where anyone walking by must face the reality of our performance. Lately, performance has been amazing, so we added a gong to celebrate wins throughout the day. These little things might seem silly but the impact on camaraderie has been immeasurable.

You have to lead by example, culture is set by leadership and there are no short cuts

Similar to taking action, leadership leads by example. This not only applies to the values of the company but also the common traits of leadership. Leaders are almost always curious, relentless in work-ethic, good listeners, and ambitious in goal setting. Good leaders have most, if not all of these qualities, if not it’s unlikely they can spearhead or drive the company mission.

Leaders who aren’t relentless in problem solving, listening to the employees on the front lines, and must have things done their way are unprepared to lead a company to the results needed to fortify great culture.

There are a multitude of paths to creating great company culture.  No matter where your company is on the growth curve, remember culture starts early (there’s no bigger reward than setting the foundation for a successful business) and it must be LIVED not just spoken about or hung on a wall in the office.