That was the title of last week’s Texchange event on the timely topic of Product Development.   A panel moderated by Tom Hale, Chief Product Officer of HomeAway and including Mike Svatek of Bazaarvoice, Ash Maurya of Spark59, and Sam Heywood of uShip drew a capacity crowd in the AT&T Center ballroom and was assisted by a dozen discussion leaders at the dinner tables.

This is an issue that almost all the startups and early stage companies in my view are grappling with.  It’s one thing if you have a going business with multiple product lines and the luxury to expand or kill any particular one as you choose; it’s quite another issue if your livelihood totally depends on bringing that first product to market.

One of the key statements in the opening discussion was that one person on a development team needs to be the “spirit” of the product.  When I think of that I recall Enzo Ferrari and his earliest post-WWII racecars (photo above).   He built a powerful high-revving 12-cylinder engine and wrapped a simple body around it with the sole purpose of maximum speed.  He had a very clear statement of his product intent:  “I don’t care if the door gaps are straight.  When the driver steps in the car, I want him to sh*t in his pants.”   Crude but elegant, and the high style that we associate today with Ferrari would come along much later on the basis of all the race wins that original philosophy delivered.

Il Commendatore was an example of tyranny in product design, and the panel seemed to agree that both democracy and tyranny have their places in a multi-person product team.  At some point the one person ultimately responsible may have to call the shots.   And, that may include even overruling the inputs of prospective customers.   There was largely a B2B audience at this event, but particularly with consumer products people may not know or be able to express their real feelings about a new concept presented to them.   I’ve always found focus groups in particular to be easy to manipulate to a desired answer.  And, with groundbreaking products of the type that have made Apple so successful, we clearly saw that one person’s instincts brought into existence shiny objects that far exceeded normal imagination.

Our table discussed the runaway product design problem.  When does that “spirit” go beyond the basic business requirements and result in runaway features and missed deadlines?  This was viewed as a very common problem in startups, and it’s one that affects funding as well.  Investors will almost never follow behind $Millions invested in a product that could have been monetized along the way but disdained customers in order to stay on a track toward the ultimate feature set.  I tried to help a couple of years ago with one such project where 43 different versions were created as demos for prospective verticals, but none were actually sold.   Technology is moving so quickly now that long development cycles may well result in the competition stealing the show or a product that is already “moldy” even when first launched.   There comes a time to button up whatever works and let customers have at it, and many entrepreneurs have a difficult time letting go.

Once a product is launched and is part of the fabric of a company’s offerings, the ability to kill it may be limited.  Someone brought up the practical issue that what seems to be a poorly performing product may the very one that a particular sales team is using to make its quota for the year.  Or there may be especially loyal customers that rely on that product and as a result buy others from your company.  Once a product is introduced into the price list, the interdependencies multiply rapidly.

Tom Hale closed the session by demonstrating the toy drone pictured below.   He used it to make the point that successful products can come from the most unexpected places.  In this case a French company that makes chips for very specialized purposes had one employee who realized that he could design a very stable 4-rotor drone using one of those chips as part of its control system.  If you’ve every played with a typical toy helicopter, you know how hard they are to fly, and this machine is easy to maneuver, knows to hover at about 4 feet if your inputs would throw it awry, and is just fun.   The inventor essentially developed the product, proved on his own that he could sell it online, and then it became part of the company’s offerings.  

So, it may not be a Rocket to the Moon, but even a clever drone can be an unexpected moneymaker if you let innovation rise up from your ranks.

<photo of Ferrari from Nerd Insurance>

 <photo of drone from Amazon>

On January 10 my daughter Audrey and I attended the Austin Forum, a regular monthly lecture by distinguished researchers from the University of Texas.  (Dad is always good for some live entertainment when the boyfriend is out of town.)  This forum series provides insights beyond the normal realm of TechDrawl content on entrepreneurial topics, and I hope you find this occasional brain food worth reading.  One of my loyal subscribers asked me recently how I could write on subjects about which I have no knowledge, and I assured him (let’s call him “Charlie”) that I am not alone in that practice.

The topic of the evening was “The Predictive Brain:  How Past Memories Influence Future Decisions”  -- presented by Dr. Alison Preston (pictured above), an assistant professor in the Department of Psychology and Section of Neurobiology and a member of the UT Center for Learning and Memory.  This drew a crowd well beyond the capacity of the venue at the AT&T Center, and as the Foursquare Mayor I found this to be rather heart warming.   (It may be “good to be the king,” but it sure is easy to become the mayor.  User initiated check-ins will soon be artifacts of a quickly forgotten era in the Consumer Internet.)

Now back to the topic, which does have an important lesson for all of us at the end…

Dr. Preston defined memory to include facts, acquired skills, habits or fears, and events you experience – all things supported by different parts of the brain.  Experiential memory is “mental time travel” and is housed in the Hippocampus, where her research team hangs out.  She showed a video trace of a single neuron in that region of the brain responding to the subject’s observing particular video clips, in the test case a Simpsons episode, and then again responding just to the recollection of that same stimulus.  I was at that point wondering if a glass of fine Single Malt kills a few brain cells, does it erase very specific experiences?

She showed interviews of research done with subjects who had lost their Hippocampus to a virus.  They exhibit anterograde amnesia -- no memory of events after the disease -- but are otherwise smart, full of prior memories, and engaging.  Since live subjects aren’t too keen on having cranial probes inserted or brain parts extracted, these rare subjects who have very specific injuries or illnesses are obviously prized research specimens.  She said that Alzheimer's looks the same in early stages but then progresses through the brain.  As one who has had two direct ancestors succumb to that disease, I’m hoping Dr. Preston’s work sheds some light on possible treatments.  Otherwise I’m going to buy a very fast motorcycle just prior to the age where that seems to overtake my strain of Dyers.

The Hippocampus glues together all the things that happen during an event and reactivates all the brain pathways associated with that event.   We can then use that memory to predict, and to imagine.  Shared content triggers recall of everything related in the past, and this remembering influences the way we learn.  She referred to this as “Inferential learning” – anticipating linkages among events and applying them to what we store as memory.  Her team employs Functional Magnetic Resonance Imaging (fMRI) to study this, and the supercomputing capabilities at TACC have made possible rapid analysis of collected images from fMRI studies.  The goal is to correlate what we’re thinking about while we’re actually experiencing something new.  

Now for the punch line…

Dr. Preston emphasized that sleep plays an important role in stabilizing memories. Experiences are replayed during sleep, which makes memory stronger.  Test subjects show fewer errors on things queued during naptime and thus allowed to bolster the relevant neurons.  Sleep facilitates the gist of an idea, insights, and inferences.  Our memories anticipate, go beyond actual experiences, are ever changing, and actually need enough sleep to accomplish their tasks.  So, the next time you decide to “sleep on” a decision, know that you have a scientific basis for doing so.  And know also that all-nighters prior to an exam have very little effect.

The implications of Dr. Preston’s studies go beyond basic understanding and apply to educational practice, and a whole new field of legal practice known as Neurolaw.  Your honor, my Hippocampus is to blame, not me…

<image of Dr. Preston from Austin Forum site>

<image of Hippocampus from Wikipedia>

You’ve no doubt seen multi-year financial projections prepared by accountants.  You get a plethora of spreadsheets showing income statements, cash flows, balance sheets, capex, assumptions, amortizations, tax estimates and all manner of interlinking numbers from sheet to shining sheet.  These thorough presentations have their place and are worthy products from anyone training in the accounting profession. 

However, at the startup or early stages of a company, this mountain of data often tends to obscure the numbers on which you need to base your decisions.  I spent time this past weekend wrestling with a workbook with 17 spreadsheets, many of them rolling out over 60 months and including summaries at the end, curiously enough ending up with the column “BS” – and I’m not making that up.  I was preparing for a potential investor an analysis with respect to trimming distribution methods and overhead, and I quickly found the expected issues with broken REF’s when I tried to make even minor changes.  Performing surgery on a model of that scale is almost more difficult than building it in the first place. 

I’m sure the original author of the model was following a template he or she uses often and probably could have manipulated it more easily than I could, but that person was not on the scene.   Just as coders have a natural instinct to throw out everything written before them and rebuild software from scratch, I believe spreaders of sheets have the same tendency.   We all develop our personal styles that are most comfortable and most easily managed through repeated iterations.

The core issue of an overly complex model for a startup is that it is just compounding from day one assumptions that have not been tested.   I can understand why many investors no longer look so closely at the numbers, particularly anything beyond the first year.  I heard a VC long ago say that with the invention of spreadsheet tools everyone could produce a pretty model with very little thought as to its core elements, and he thereafter paid relatively little attention to them.

I ended up boiling all this down to a new two-sheet workbook that addressed the investor’s core questions about runway he would be buying with his dollars.   The financial expert at that firm had been given the complex model but probably like me found it hard to tackle.  Seeing everything condensed made visible the actual cash needs under the newly trimmed format.  But, as a byproduct, it also revealed some flaws in the pricing of a strategic relationship that needed to be addressed as well.

We went from a mountain of GAAP data to a pretty simple picture of a real live situation.  We had something on which to make decisions that could lead to a better outcome.  And, some beneficial changes in the operation of the company will be a result.

Some of my core recommendations for creating a decision model are these:

1.  Keep the important assumptions highly visible and make them easy to change.   You should be able to see on one summary page the direct result of bumping prices or changing any assumptions about volumes.   You essentially need one dashboard that lets you manipulate the key variables and measure the consequences.

2.  Let your accountant worry about the GAAP presentations.  Your only interests are whether your plan has sound arithmetic and how much cash is needed when to enable you to execute that plan.

3.  Stress test that plan.  Try the extreme ranges of your input variables and see what happens.   You’ll discover how much cash cushion you may need if products get delayed or the revenue ramp doesn’t quite have the positive second derivative you estimated.

4.  Keep the presentation simple.   Staffing details, for example, can be in an ancillary sheet.  Investors will assume you can manage expenses to match the needs of the business, and their main focus with respect to staffing will be a reality check on head count versus revenues.  If you are showing 5 people generating $50M in revenues, you probably will have some explaining to do.

5.  Once you have gotten comfortable with your model, and you have raised your financing, try to lose it quickly.   It will change next month anyway, and you’ll be working on a new model after your first few tests on the battlefield.

For those of you youngsters who don’t recognize the image at the top, that’s the implement that put men on the moon and was the basic tool behind every financial model for startups in my early career.

<photo of teaching slide rule on author’s mantel>

Hall Martin’s Texas Entrepreneur Networks offers an interesting alternative for Texas based companies looking for capital.  He runs what he calls Funding Forums where he assembles groups of investors at various locations around the state and stages for them presentations by 10 companies at each stop.  I attended the Austin event on January 12, 2012 at the Norris Conference Center (their generic photo above).

As an aside, this particular conference center is in itself what looks to be an interesting business model – repurposing shopping center space with poor frontage exposure into a destination for various shows and events.   I’ve been to several shows at this particular location, and there’s even an adjacent ice rink if you want to negotiate your deal on skates.

The January 12 Funding Forum was the first stop on a 4-city tour including Dallas, San Antonio, and San Marcos.  There were six investors or representatives of investor groups and family offices on the front row who introduced themselves, plus some number of others who were scattered in the audience.   Presenters pay $1000 each to appear at the 4 shows on this tour.  (No roadie jackets included, however.)

This is more of a matchmaking activity than a typical angel group investment “process.”  Hall has a good following of investors from low to high tech, and he attracts a similar diversity of presenters.   Each is given a 15-minute slot, 10 to present and 5 for Q&A.   All of the presentations showed evidence of coaching and included the fundamentals that any good pitch requires.  There were the few inevitable technical glitches, and, as is always the case, some presenters will never realize that very small fonts are unreadable beyond the very first row.

This particular batch included 10 companies raising in the aggregate $7,350,000 and with total 2012 projected revenues of approximately $13M.  A couple were under $50K in revenue, and one was more like $6M, so don’t divide anything by 10 and come to any conclusions.   The companies included 3 in the production and/or distribution of healthy foods (no biscuits & gravy mentioned), another dealing with assessing your personal health via a website, two social media plays, one car buying service, a multi-player online game company, a financial information provider for public company investors, and an SMB cross-platform marketing firm.

The success rate of the Funding Forums is pretty good in terms of actual transactions, particularly given the aforementioned diversity of deals and investors.   In this batch, I’d say maybe 2 were nonstarters, 2 didn’t really explain themselves well, 2 had possibilities but were early, 1 was technically interesting, 1 was a pure franchise play, and 2 seemed to be pretty far down the track toward proving unique models and establishing revenues.  But, those are just my opinions.  Most of the more than 1000 deals I reviewed in 2011 were pure technology plays, and I was not in my element here.  One thing is certain -- several of these companies will complete their current funding rounds as presented.

Texas Entrepreneurs Networks offers a range of resources and good connections for those seeking to start and grow businesses in this area, and its Funding Forum is a model that adds value to the startup ecosystem here.  Check the schedule for the next one coming to your area.

<photo from Norris website>

Today’s TechDrawl report is filed by Jesse Dyer, CEO of TourGroove:

Congratulations to all involved in the first iteration of the Flashpoint program at Georgia Tech.  A very carefully curated group of startups was well coached and brought to the stage on Tuesday January 10 in one of the most flawless venues and formats I’ve seen.

Opportunity is knocking for Atlanta’s tech angels.  From personally making the rounds in Atlanta, Austin & New York, I can confidently say that the presenters at Flashpoint Demo Day brought everything one could ask in a tech startup...now will investors out there respond in kind?

I'm really impressed with the quality of start-ups in Atlanta.  Yes they are all SaaS, and yes many of them are some offshoot of Internet Security Systems, but so what!  Atlanta does Internet security, and it does it very well.  These are smart folks.  Again this is not a Y-Combinator scene.  These are GA Tech PhDs, professors, grads and one really sharp undergrad who all have prior technology start-up experience and are solving problems that they've faced in past entrepreneurial endeavors.   There’s no sex & violence, but these are hard B2B problems that someone needs to solve.  Why not here in Atlanta?   

Flashpoint Demo Day at GTRI’s auditorium had an overflow crowd excited to be a part of the buzz for this first outing.   It had a much looser feel then Venture Atlanta even though 1/3 of the presenters were repeats from that event.   However, it seemed all the VA grads had made progress since I last saw them, and the new faces that found their footing at Flashpoint fit in well with the regulars.

Here's the problem, by my count these startups are passing the hat for over $9M.  Where's that going to come from?  Godfather Sig already rounded up a cool $Million to get Flashpoint off the ground, and I bet Noro-Moseley will be there when a Series A is in order, but who is going to fill the gap in between?   I'm just curious how many angels are out there for Atlanta deals?  And not just in Atlanta.  I talked with another entrepreneur friend of mine who is actually a Flashpoint mentor, and he was lamenting a meeting he'd had earlier in the day when a local investor balked at him for seeking seed investment before he had finalized all development and stabilized his revenue stream.  It seems that outside San Francisco and the Valley true arms-length risk-taking angels are a scarce breed.  Austin and New York are no different.  It's telling that in 2012 when U.S. Treasuries can pay a negative rate of return that angel investors seem to expect entrepreneurs to eliminate all the risks but also to deliver a 1999 return.    

From my years in banking I saw that the country's greatest risk takers generally are real estate gamblers (sorry but it's true); I feel that since so much of the real estate wealth has evaporated in Atlanta, many of the real risk takers who would write the bigger angel checks have disappeared.   The primary angel market I see outside of Silicon Valley is for token $5-25K checks after 72-hour start-up weekends.  That's just not going to cut it here in Atlanta, and this community deserves better.  Maybe $5K will fund your start-up weekend - super lean - soft beta - 20 & 22 year old cofounders - mobile app that curates the social feed around your 80%-off dog grooming coupons...but addressing a $37 billion dollar phone fraud problem is going to take some substantial investment.  PinDrop has already found its lead dollars in Silicon Valley, but wouldn’t it have been nice for that opportunity for wealth creation to have remained at home?

If Atlanta doesn’t have $9M handy, then the Flashpoint group will hopefully find success on its stops in New York next week and California the week after that.  I hope their stories aren't lost in translation outside of the ATL.  While Internet security is all the rage here, its sex appeal is quickly neutered (unfairly) when compared to Foursquare and Facebook.  That's why it's now more important than ever that the Atlanta angel community rises up and starts writing checks again.  You don't get mobile...fine.   Can't get comfortable with Social....OK, you're not the first.   BUT, no excuses if the community of Atlanta angels can't really get behind these home grown SaaS Internet security winners.  From CodeGuard to PinDrop to Social Fortress, if these teams are still schilling at Venture Atlanta 2012 then shame on us.  I'm kicking one of you angels out of your seat next year so I'm not stuck sitting on the floor at Flashpoint Demo Day 2013.

(Editor’s Note:  I hope you Atlanta readers will take Jesse’s comments as a call to action and not as any form of criticism.   He’s been through similar forums in Austin and NY and now has real world basis for his perspective on this.  Too many potential angel investors in Atlanta have preferred to hold their money for their own deals, including me when I was in that stage of my life.  Meanwhile, we’ve seen hundreds of $Billions of wealth creation in the Bay Area over the last few years where there is an abundant supply of the aforementioned arms-length money.   Dave McClure of 500 Startups has alone invested in 252 startups in only 2 years of operations and did his first deal of 2012 on January 3.  That kind of velocity, even if you view it as “spray and pray”, is an example of how differently angel investing is defined in that one section of the US.)

So, Atlanta investors, “start them checkbooks” and make some $Billions at home.

<photo by Jesse Dyer>

Last night’s BCS Championship game had a clear winner, and it had a clear lesson.   The LSU team seemed not to have their collective heads in the game, and it started with the quarterback Jordan Jefferson, photo above.  He was like a deer in the headlights as he faced the BAMA defense, and that was apparent even to a television viewer.  Since his backup had a proven history of throwing interceptions against the Tide, Coach Miles apparently didn’t think he had a choice.

There is no coach to call the plays in a startup.  You have to step forward as the CEO and make real-time decisions that involve complex interactions among employees, customers, and vendors.   Yes, there may be a board, particularly if the company has taken on some investment, but I’ve often heard it said that the only purpose of a board is to fire the CEO.   I don’t subscribe to that view; board members can be very effective as business developers or fundraisers if you equip them and encourage them for those roles.  And, their advice can be very helpful.  But, they’re never going to be the ones immersed in the day-to-day and suffering the body blows, so there’s only so much they can do to share your load.

When things are going very well for a startup – happy customers, deals getting done, payrolls getting met – the entire team is energized.   A good CEO is always the head cheerleader and head rainmaker, and you need to ride the waves of those good times to strengthen the ranks.  Some companies successfully use various types of extracurricular team-building exercises, but I’ve personally found that nothing beats the adrenalin rush of knowing that the company is accomplishing something in its chosen market.

On the other hand, as with LSU last night, when things aren’t going at all well – delays, financial pressures, missed targets – as CEO you have to instill some fortitude up and down the line and maintain confidence.  You have to keep everyone on the same page, with none of those shovel pass interceptions while your intended receiver is blocking in another location.   And, likely you will have to deal with a lot of dissention within your own leadership ranks.   I’ve always recommended that when things are going well, just take credit for good management.  When things aren’t going so well, then it’s time to look for excuses.   But, excuses won’t solve the problems and improve the situation.

One or two individual efforts can provide a turning point.  Even if you as CEO are at your wits’ end, you may have someone in the frontlines of your team with a creative idea that can be a turning point.  Somebody needs to make just one extraordinary play -- mixing league metaphors here, but think of Demaryius Thomas’ individual feat of turning Tebow’s first 18-yd pass in OT into a long touchdown Sunday in Denver. 

As with all entrepreneurial endeavors, you face the good and bad times dealing with lots of ambiguity and lots of uncertainties.   Jefferson never knew exactly what defense would be called against him, whether the BAMA players would execute, or whether his own players would perform according to the designed play.  Fatigue became a factor, and you could see the confusion and frustration as LSU could never even find and hold the 50.   Give the opposition due credit, but the Tigers just weren’t able to perform at their capability and weren’t able to adjust to adverse circumstances.  This appeared far more mental than physical, and that traces back to leadership.

McCarron, on the other hand…that’s the CEO you want to be.  

 <Photo from Arlington Star-Telegram>

As I tallied up 2011, I realized that I had reviewed, evaluated, judged, advised, or opined on well over 1000 start-up or early stage deals, and I expect that trend to continue in 2012.  This is something I enjoy doing, for many reasons.  It’s interesting to see the worldwide patterns that come and go in creative startup minds, and it’s always a particular joy to meet aspirational young entrepreneurs in hot pursuit of their dreams.

My deal flow is by no means a representative sample of the startup universe.  It is skewed more toward digital media, with less hard science and almost no life sciences.  But, I can make some interesting observations from this pool.

Déjà vu – I looked at one set of executive summaries where I calculated 20% were just about exactly the same concept.  All those were in the general category of “using my mobile device to organize my friends and/or family activities.”   That’s not to mention the already healthy number of companies playing in that same space.  Are these ideas being created in vacuums with no thought to existing tools?  Is the problem that significant that it requires so many solutions?   This is a prime example of where operating in a strong start-up ecosystem can be a huge benefit.   No matter how much you read and research online, just being in a human community where you can describe your deal to a knowledgeable listener can keep you from re-doing the obvious, can connect you with something similar where you can add value, or can spin you off in a totally different direction.   These ecosystems in places like the Valley tend to protect their offspring by providing a dimension of personal feedback that might not be found in, say, Ludowici, Georgia.   (Some decades ago its leading industry was its infamous speed trap.  Where else but TechDrawl could you learn such fascinating tidbits of Southern history?)

The Kicker – Bob Metcalfe here says repeatedly that the world’s problems are not going to be solved by another website.   Yet just this week we see companies like Klout getting a $30M infusion from top rank VC’s.   Does that mean my Klout score will eventually determine whether I can get a job or buy a home?  Will it be on an RFID chip in my elbow that also has my medical records?   (I’d cite my Klout score here, but when I try to check it all I get is “internal server error.”  Hopefully some of that $30M is going toward technology.)  Certainly for some careers indices like this are relevant, and yes there is still plenty of money to be made in new websites and new mobile apps.   But, when you look at a mountain of deals as I have over the last year, the ones that stand out are the ones that appear to have some protectable science underneath and are not relying strictly on being coolest, fastest, or "firstest."  That science may be embodied in an algorithm, a chip, or a device, but it changes the nature of the game and provides what I would call a “kicker” to interested investors.

Traction – There’s that word again.  Entrepreneurs complain that if they already have traction and have taken the risk out of a deal, then investors aren’t actually taking much risk.   But, you can see from the investors’ perspective how with so many similar deals, the cutest ones that come to the front of the cage ready for adoption are the ones that have shown an ability to create real customers and real volume.   (Austin is a rather slow market for local TV news, so there are lots of animal shelter stories.  I thought I should throw in something analogous here.) Investor risk is indeed greatly reduced if you let the marketplace do the preliminary sorting, particularly when there are so many replica deals.   If there’s no kicker that truly differentiates, then traction is the next best test.  And, you can see why investors find it easier to play in B2B deals where a few big customers or channels can be sold up front to prove the market.  

Proxies – That’s a term that has surfaced several times this past year.  If you have a new concept, what similar concept is an adequate “proxy” for your proposed revenue model?   How do you set the price?  Who else is paying what you plan to charge, and what are the competitive pressures?  Even as far back as my Peachtree Software days, just creating a price list was a challenge.  That topic alone is almost worthy of a business school course, but it’s trial and error for most entrepreneurs.   If your concept has multiple revenue streams, or perhaps mixtures of capital costs and recurring fees, you quickly find many permutations.   You can conduct surveys and get some useful input, but genuine proxies can be your best guides.  I’ve found that it’s very hard in particular to ask consumers what they will pay for a new and novel product or service.  You might pay a lot more than I for something that catches your fancy, or vice versa, but the question is what on average is reasonable.  And you often must learn that the hard way as your launch yourself into the market.

I would say more on this topic, but it’s time now to go look at another deal...

<image found in my wallet>

The year 2011 was certainly the year of mobile.  The apps world exploded, and many developers are thriving in that space.   It was also the year in which content consumption and even online shopping shifted dramatically in favor of mobile devices, primarily tablets.  I have become accustomed to all my reading on my iPad – from the WSJ and Economist to my library of books.  Choosing to read in print this week a book that interested me but for some reason was not available in any ebook format was not a welcome experience.   Barnes & Noble is a great place to browse, and the Nook is a fabulous device, but its current big box category killer stores are doomed in my opinion.

A particular article in this morning’s WSJ on the immobility of the labor force caught my attention and resonated with a number of personal experiences this past year.   I’ve “borrowed” its chart above since links to WSJ content expire quickly for nonsubscribers.   Here’s a classic quadrant grid, but one where you do not want to be in the upper right box.  The article speaks to the inability of the labor force to relocate to where it is needed because of underwater mortgage loans.

Classically when one was applying for jobs in corporate America, checking the box labeled “willing to relocate” moved you way up the priority list.   Now many are willing but not financially able.   And, there’s a limit to which corporations can cover relocation expenses when someone applying for a $150K job may be $300K upside down in a house.  

Gowalla here in Austin was very recently acquired by Facebook, and its team has already moved to the Valley.   Neither the Valley nor Austin appear on the accompanying chart, but judging by the dots for Dallas, Houston and San Francisco, I’m supposing that move was financially practical for most of those employees.  Facebook can afford to pay them enough to offset much higher housing prices and those California state income taxes.   There’s also a considerable reverse flow from the Bay Area to Austin; about half the residents in my development are California transplants.  

Meanwhile, there is a considerable talent shortage in Austin for software developers and technology oriented creative types.  And, I know personally of suitable resources in Atlanta and Orlando that could do that work.   So what are some possible solutions to removing this “friction” in the labor markets:

1.  “On-shoring” certainly works for many companies.  We seem to have perfected the art of putting call centers and software development shops in distant continents, but those price advantages are eroding, and US cities with deep pools of technical talent would do well to organize their efforts of importing work from cities where that talent can be utilized.   We have long had the technology tools to make telecommuting practical, and, in particular, cities like Atlanta and Orlando have easy air service to just about every location where in-person appearances might be needed.  (That’s one knock on Austin; air service here too often requires hops through Dallas, Houston or Atlanta.  The local airport is lovely; even the dining is destination quality; but it’s just not that big.  It will be interesting to see how the Formula 1 spectators from so many international destinations get here in November next Thanksgiving week.)

2.   Management teams can even function remotely for earlier stage companies.   Ventures can form around scattered key people if the core operations are in the right location for investment, customers, and other strategic resources.   Management by Walking Around involves a little more flying around from time to time, but I’m seeing this model work.  Better leadership teams become available when the net can be cast a bit farther and relocations are not required.

3.   HomeAway is a local success story in the vacation rental market, and I wonder if companies like that might be able to remove some of the housing friction by enabling people more easily to lease their primary homes in order to pay rent or a mortgage in a new job location.  The WSJ article quotes one person as saying he has no interest in maintaining a rental property 2000 miles away, but that model certainly is common in vacation rentals and has spawned an industry of property managers to handle all the maintenance and leasing headaches.   They get their cut, of course, but they generate cash from otherwise idle real estate.

4.  Is there a way to create a housing exchange market?   Being able to swap your underwater home in Vegas for one with similar numbers in Phoenix might make sense if you means you get a better job, but the current morass of rules and regulations and the brokerage processes present considerable impediments to that idea.  I don’t plan to work on that opportunity, so it’s yours if you want it.

There are many reasons other than mortgages why workers are immobile, and I can appreciate those.  I know of two medical professionals now who have considered relocating but are highly constricted by varying state licensure rules.  The same applies to lawyers who have to qualify for the bar state by state.   And, there are the very important family concerns like being near an aging parent, not displacing kids from schools where they are comfortable, especially during the teenage years, and just plain liking where you live and the current friends you have.

But, unemployment will be the centerpiece issue of the 2012 elections, and it behooves us all to think of more creative ways to address this when so many of the contributing factors are different from past eras of job losses.

I chose to move in 2011.  I had the flexibility to do so and was able to move to a city where I had family and friends.   It has turned out great for me, and I’m about 60% of the way closer to this year’s Georgia Tech bowl game.   However, the remaining 40% will be traversed on my couch by TV viewing. 

<image from WSJ attributed to Moody’s Analytics; CoreLogic>

Twas the night before Christmas, when through the co-working space

Not a creature was stirring, not even coders apace.

The ideas were drawn on the whiteboards with care,

In hopes that St. Venturesome soon would be there.

The designers were nestled all snug in their beds,

While visions of MVP’s danced in their heads.

A friend this week passed along to me the Cult of Done Manifesto, which was first “poted” on the linked blog in March, 2009.  Evidently proof reading was deferred to the post-done phase.  Nonetheless this is a timely topic in that several projects in which I’m involved are fast approaching their launch dates.

Nothing focuses a development team on a deadline more acutely than the presence of a real customer and/or an investor who wants to acquire a working product.  There are always more features to be considered and more final tests to be run, and there are inevitable environmental issues such as OS or other component upgrades that can impact even the most buttoned-up designs.  However, at some point the risk of delay outweighs the risk of releasing a few mistakes.

Having grown up in the software business when almost none of the underlying elements worked as advertised, I came to respect our loyal Peachtree Software customers as beta testers.  We didn’t in those times have the Internet to blast out instant updates, but we didn’t bring any business to its knees if its books were out of balance for a few days.  The pressure is much more intense now that very large customer bases count on systems performing flawlessly, particularly with respect to security and money handling functions.  Experimenting on end users in this context certainly has its perils.

A more mature company with other revenue streams may have the luxury of absorbing delays.  Or, as in the case of RIM, we seem to be observing even a heavily entrenched brand being derailed by just that issue.  If you’re at the startup stage, and particularly if your access to funding depends on filling customer orders, you have no cushion.  When you’re at the “fume” stage, as Bob Metcalfe calls it, your options become mighty limited.

Lots of entrepreneurs deal with this by designing the proverbial “minimally viable product” and letting it loose into the wild.  Sometimes that strategy works for things like apps that are not exactly mission critical.  If your core concept resonates with a customer audience, you’ll get the chance to make updates and solidify your base.  One of my favorite products is Evernote, and I’ve stuck with it through a bunch of “upgrades” that have at times almost rendered it unusable.  But, that company seems to eventually get things right, and I have work-a-rounds for the bugs that affect me.  Evernote is far beyond the MVP stage, but it’s a good example of something that resonates with users.

If on the other hand you’ve chosen to create something much more complicated and one where fatal errors can be fatal to your business plan, and you absolutely have to get it out the door, what is the answer?  I think it’s just basic engineering problem solving.   You’ve got to work back from a deadline and define exactly what has to be done and how it is going to get done, and just make it happen with whatever resources you can muster.  You have to make all decisions on what to do next in the context of such a plan.  I’m about halfway through the Steve Jobs biography as of this writing, and he was able to motivate his engineers to do the impossible on many occasions when product releases were due.  And, as you know, he was generally unwilling to make any design sacrifices to make developers’ lives easier.  You may have no one above you on the org chart that exerts that level of personal pressure, but you are the one who faces your customers and investors, and they’re just as persuasive.   If necessary, pause for a moment to regroup, but only a moment, and then go forth on the plan.

I debated titling this post either “It’s Done, Right?” or “It’s Done Right?”  The answer to both has to be “Yes.”

<Poster by Joshua Rothhass from Flickr "spatulated">