MCED Blog

MCED helps innovators fill in the gaps between their deep industry expertise and the strategic business skills critical to launching a scalable, sustainable venture. Maine's unique economic and geographic challenges demand more that a traditional business incubator. They demand a catalyst.

Top Gun Showcase recognition
Nice to get some Top Gun Showcase Recognition!
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Great article on Mentoring
Insights on Mentoring
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Failure 101

My very first “real” job was working for a technology startup in Portland. I was employee number three and to this day, my time spent there remains one of the most exciting and rewarding career experiences of my life, even though we failed. I’ll get to the failure part in a bit.

First, allow me to set the stage: Portland’s Old Port in the mid to late 80s was an exciting place to be. The cobblestoned streets were lined with eclectic shops, upscale law offices, real estate development firms, cool startups, and great, I mean really great, restaurants. Remember, this was a time when credit card interest was still a tax deduction so two-hour power lunches were common. (Heck, Happy Hours started at 2:00 at some bars.) Word Processing typewriters sat on desks along with intercom systems and if you were an early technology adopter, you bought a computer from a value added reseller like Valcom.

Our company had developed an early barcode point-of-sale application with an inventory control module called It Works. Four investor/partners, and the developer, launched the company in 1986 and by 1988 we were out of business. At our peak we had a hip Old Port office on the third floor of 5 Moulton Street and a well-stocked beer refrigerator. We often joked that it was “happy hour somewhere” as we popped beer caps, but that’s not to say we didn’t work hard because we worked very hard.

Since working at MCED for nearly five years now, I’ve had the pleasure intersecting with many startups; I often find myself reflecting on the lessons I learned from working at a failed one and am struck by how relevant they still are today. Here are a few things I learned from the experience:

1. Slow down and get it right first.

We came out of the living room too quickly. I totally agree with Steve Blank’s teaching that you should talk to customers early on but we sold to customers too early. We had installations at Sunday River, Joseph’s clothing store and Colonial Shoe. Customers led to needing an office, having an office meant hiring staff, having overhead created sales pressure, adding customers prematurely led to technical problems with the product- which ultimately meant less time for R&D and more time putting out fires.

2. You might survive one bad decision but not a series of them.

We decided a second programmer was needed to get us back on track because our lead developer was now spending several days away at Sunday River. To offset this added salary expense we became VAR dealers for hardware and started selling a couple of software packages. The hardware solution wasn’t terrible but the market was still small and selling hardware created the need for more storage (read additional office space) and a hardware guy. Ca Ching!

3. Know thy customer.

In an effort to generate more revenue, we chose to sell the Ventura Publishing suite and a restaurant POS system called Digital Dining. We sent a couple of employees to a very expensive conferences and trade shows to learn and be able to sell the products. While we were correct that desktop publishing was going to be a game changer, had we done our homework, we would have learned that 99% of the tiny desktop publishing market was using PageMaker and significant sales were still years away. Plus, the few customers we did manage to land required a lot of technical support. Ca Ching!

Even though Portland had more restaurants per capita then any other US city, most of them were small 40-seat places that purveyed daily, paid employees under the table and ran cash operations. Restaurant owners didn’t care about inventory control or time card management features and the big players like DiMillos and the hotels were all happily adapted to a biggest player in the market, Remanco.

4. Hire a CEO ASAP!

We never had CEO. Each partner had an area of expertise, two lawyers, a sales guy, and an established business owner and though not a partner, our lead developer was a shareholder. It has been said that unreasonable founders sometimes get in the way of good execution and that was definitely at work. We were leaderless, lacked a core sales strategy and never fully developed a business model. Desperation gave way to unsound business decisions. A seasoned CEO would have made the difficult choices earlier on that would, most likely, have resulted in layoffs but perhaps the ultimate survival of the company.

5. Wall Street matters.

Nothing sours a startup like drastic market dips and on October 19, 1987, Black Monday, two of our partners lost a great deal of money. Although the crash of ’87 proved to be less of a drag on the economy then predicted, the feeling of not having a safety net weighed heavily on us and within a few months the layoffs started. The office closed later that fall and in early 1988, the dissolution process had begun.

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Ag Tech gets VC funding!
Agricultural Tech funding grows
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Scaling
How to think about initial scaling
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I Have An Idea
I Have An Idea Table Talk
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Another Pets and Vets Cluster company
College student's Dorm Business
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Good Timing

I spoke last night at the monthly PubHub gathering at the Casco Bay Tech Hub. It was fun, and an honor, to join the line-up of distinguished speakers who have shared their stories with the growing entrepreneurial community that gathers each month to network, drink Baxter Brewing beer, and support each other in their respective ventures.

My subject was "Aha!" - things that have struck me, sometimes like a sledge hammer, sometimes like a gradual dawn, as important to doing this entrepreneurial thing. I finished with my Aha! about timing: I'll take good timing over the first mover advantage any time.

My dad's entrepreneurial misadventure was a case of bad timing: computers installed in trucks to monitor drivers, and communicate back to home base. The late 1970s was perhaps 20-25 years too early, and the company failed while I was taking a year off in college.

I wrote reports about the future of telecommunications in my first job, at The Yankee Group. I was speculating about fiber optics to the home - in 1982. Thirty years later, it's starting to get close.

I started my a cappella music catalog in 1992. Twenty years later, in 2012, the movie Pitch Perfect grossed $190 million with a story about college a cappella groups. (btw, the non-fiction book Pitch Perfect has a chapter about me as the evil capitalist of a cappella)

But now, for the first time in my career, it feels like my timing is just right. The Maine entrepreneurial scene is poised for growth after more than a decade of ground-breaking work. Jake Ward of UMaine sits on the MCED board; he's been at this for 20 years. MTI was started more than a dozen years ago, as were a number of the incubators. 

I've been at it now for about 2 1/2 years, and I can see and feel the community growing in a sustainable way. The best metric is great people, moving to Maine or coming out of the woodwork in Maine to try their hand at building ambitious ventures. The crowd of 80 or so last night was just the latest confirmation; today I'm heading to Orono for a packed Pitchfest, sold out Equity Prep class, and our latest and greatest Top Gun (which concludes May 22 with our big Showcase). The time is right!

 

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Aha! That's What Reconciling Is For

I'm talking tomorrow night at PubHub about my "Aha!" moments. Some of them are basic but important, stemming from lessons learned the hard way.

One in that category is understanding why it's important to reconcile your Quickbooks accounting with your bank statements. The tactical objective is to make your Quickbooks exactly reflect what your bank is telling you (and occasionally, vice versa).

It's a labor-intensive manual process, even with Quickbooks' help, and when I started my business I didn't ask my staff person doing our bookkeeping to do it monthly. Big mistake. When I finally realized there was a yawning gap between the two versions of our P&L, it took many days to make it right. Back to that in a moment.

I should have realized it was important early on, as one of the most vivid memories from my first job, as an analyst at The Yankee Group, was "Black Thursday," when a third of the company was laid off. The precipitating event was bad bookkeeping combined with a lying, cocaine-snorting VP Sales. She'd been snowing Yankee Group President Howard Anderson with stories of sales closed. Meanwhile, bookkeeping was a bit behind and sloppy, so the shinkage of cash was unknown even as new employees were being hired to keep up with all of the phantom new business. Finaly, it hit the fan, people were let go or fired, and I suspect improved bookkeeping followed thereafter.

Monthly reconciling of bank statements and computerized accounting would have brought the problem to management much earlier.

In my a cappella music business, the large gap between bank statements and Quickbooks led to some forensic accounting. My wife Kate in particular started looking at some large paychecks going to the staffer doing the bookkeeping. Oops. The staffer suddenly "quit" and "worked closer to home" at a 40% (nominal) pay cut. We didn't pursue charges but suspected the bookkeeper had been overly generous to herself.

After that, we hired an outsider to reconcile books once a month. He was a retired cop - squeeky clean, good on process, sure to catch anything funny in the books. Aha! Reconciling is about keeping the books on the straight and narrow.

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Cool Companies for Maine grads

Last night I visited USM in Gorham for the final class of this semester's "Innovation Engineering - Create" class. I haven't taught the class this year - I've been trained to teach the second course, "Innovation Engineering - Communicate" and I was there to convince some students to sign on. Valerie Lamont and I are scheduled to teach it in the fall.

After doing my pitch I hung around to see how the students were doing. I was pleased to see several student presentations about innovations they thought were interesting.

One of the students (a class star, I was told) showed a video of a car "rally" that takes place in Morocco, the only rally in the world where women are the only drivers. She was obviously excited about the event, and more generally, high adreneline outdoor events.

So I shared with her and the class one of the Cool Companies of Maine. Aura 360 is in Portland - actually just down the hall from us at 30 Danforth St. They produce and own some crazy high adreneline sports on behalf of major global brands. "This company is in Maine?" she wondered. 

YES - there are lots of cool companies in Maine! She dreamed of traveling the world for them.

Connecting smart undergrads to cool companies is part of the Blackstone Accelerates Growth mission, and I hope to be spreading the word about more cool companies in the future!

 
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