Oxyfish

I’m getting to the age where if I go play a sport I haven’t played in a while, I ache for days afterwards. I recently played 5-5 full-court basketball for the first time in decades, and could barely walk the next day. Some of those hurts are “good hurts” – sore muscles that are getting stronger from the workout. Some are “bad hurts” – like a partially torn rotator cuff. They all hurt, but it can be important to distinguish between them, because the remedies are different. And no matter what you call them, they still hurt like hell.

Similarly, in startups, we talk about “good problems” and “bad problems”. Bad problems are the ones nobody wants: unhappy customers, products that don’t work, or markets that don’t materialize. Good problems are ones that sure seem like they’d be nice to have: too many customers sign up at once, investors want to put in too much money, etc. Just like bad hurts and good hurts, bad problems generally require outside intervention to fix, while good problems work themselves out through positive progress. Everybody says they want the good problems, but they are still problems – and they still require a hell of a lot of work to get through.

Cloud computing means lots of different things, and much of it is hype. At Yieldex, we’ve been using cloud computing, specifically Amazon Web Services, as a key part of our infrastructure for the better part of a year, and we thought we’d pass on a few of our lessons learned. As you might expect, the services we use have trade-offs. If your challenge fits within the parameters, cloud computing can be a huge win, but it’s not the answer for everything.

All of these lessons are the result of the hard work of our entire engineering team, most notably Craig and Calvin. These guys are among the best in the world at scaling to solve enormous data and computation problems with a cloud infrastructure. We could not have built this company and these solutions without them.

For a startup, there are a number of compelling reasons to use a cloud infrastructure for virtually every new project. You don’t get locked into a long-term investment in hardware and data centers, it’s easy to experiment, and easy to change your mind and try a different approach. You don’t have to spend precious capital on servers and storage, wait days or weeks for them to arrive, and then spend a day or two setting them up. If your application scales horizontally, then you can scale additional customers, storage, and processing with minimal cost and time delay. All these things are touted by cloud providers, and basically boil down to: focus on your business, not your infrastructure.

Sometimes, however, you do need to focus on the infrastructure. We provide our customers with analytics and optimization based on our unique and proprietary DynamicIQ engine. Our first customer was a decent sized web property, and we were able to complete our DynamicIQ daily processing on several gigabytes of data using just one instance in less than an hour. Our next customer, however, was 10x the size. And the one after that, 10x more – hundreds of gigabytes per day. Fortunately, we had designed our DynamicIQ engine to easily parallelize across multiple instances. We spent some time learning how to start up instances, distribute jobs to them, and shut them back down again, but because we had designed the engine for this eventuality, we were able to use the cloud to cost-effectively scale to even the largest sites on the web.

We also have BusinessIQ, which is basically an application server that provides query processing and a user interface into our analytics. Initially we started with this server in the cloud too, but as we bumped up against other scalability issues, we found that the cloud doesn’t solve every problem. For example, we provide a sophisticated scenario analysis capability. To calculate a “what-if” scenario requires processing a huge amount of data in a very short time. For our larger customers, a single cloud instance did not have enough memory to perform this operation. Trying to stay true to the cloud paradigm, we implemented a distributed cache across multiple instances, but this didn’t work well because of limitations on I/O. We ended up having to go to a hybrid model, where we bought and hosted our own servers with large memory footprints, so we could provide this functionality.

We have been very happy users of the Amazon Web Services cloud, and not just because we won the award. We would not have been able to get our business of the ground with out the cost effective scalability of the Amazon infrastructure. While it’s not for every application, for the right application, it truly changes the game.

The Richter Scales got a great response from the audience at the Crunchies, after making fun of just about every aspect of running a Web 2.0 company in these trying times. My contribution consisted mostly of showing up and not flubbing the couple lines they gave me – it’s great to be in a group with such talented people!

I was recently asked what advice I would give to aspiring company founders. While there are many mistakes I’ve made that I would try to warn others about, the best advice I can give is to work with great people.

Great people are easy to communicate with, and will give (and take) honest feedback. Great people make it enjoyable to come to work, and help turn a job into a passion. Great people argue passionately, then come to agreement, then work closely together to get the job done. Great people can be trusted.

Startups are hard places to work. The hours can be long, and the disagreements are often heated. Everybody has their ups and downs, nobody is perfect. There are big wins and crushing losses. But great people with great relationships get through these patches much more smoothly.

At Yieldex, I’m privileged to work with great people. Every member of the team works well with the others, and we can feel the momentum building. The result is we are executing very efficiently, and getting more done in less time than any other team I’ve worked with. Best of all, I love the feeling that I like everyone I work with, that I would be happy hanging out with them and their families. At our company holiday dinner, I was delighted that everyone, including the spouses, seemed to have a very enjoyable time. These are the times we will look back on years from now and remember fondly.

I used to row crew competitively in high school and college. Crew is a sport that epitomizes team “flow”. A boat full of great individual contributors will get beaten by a boat that is rowing smoothly together every time. We are rowing smoothly together here at Yieldex. One of my biggest jobs is to not screw it up as we grow.

Life is too short to work with jerks. Work with great people.

We won! Out of nearly 1000 startups who applied, we won!

This is a great validation of our fantastic technical team. We have been chosen as one of the most innovative users of Amazon’s cloud computing technology. We could not have done this without your hard work. Thank you!

This was a great experience for us. The Amazon team was very professional throughout, the event was well-managed, and they even made a cool video featuring our development team. The press release went out tonight, and there was even a blog post that beat mine.

Here’s the blow-by-blow, for those who want all the details:

We pitched the panel of judges, all senior execs of Amazon, at 1pm. They had 50min presentations from each of the seven finalists, and had been going since 7am. We did our standard pitch, and did a great job talking about how important AWS is to us. They seemed to appreciate the presentation, but were somewhat poker faced, so while we felt we did a good job, it was hard to tell their reaction.

Later in the afternoon, we had a “VC speed-dating” event, where we had 10 minutes with each of 5 VCs. The firms were all first-rate (BlueRun, Hummer Winblad, Madrona, Greylock, and CMEA). Our product is pretty complex, so it’s hard to get across in 10 minutes, but we did our best, and each of the VCs seemed to get it quickly enough. All were interested in following up, but again, hard to tell how we ranked.

Then there was a reception while the judges and the VCs deliberated. They had invited 200 other startup people to come hear how the seven finalists were using AWS. My guess is closer to a hundred people were in the room, and we had to do another 10 minute presentation on AWS, with slides, to this group. We managed to do it in only 5-6 minutes and get our message across. Finally, around 9pm, it was time to announce the winner. We were jubilant when they picked us – I let out a shout of joy and a fist pump, to the delight of the audience.

Andy Jassy, the SVP of AWS said some nice words and gave us the traditional golden hammer. We were then invited to take a whack at an old rackmount server they had, to symbolize the destruction of our own servers. John and I both hammered it pretty hard, but we barely dented it – those steel frames are tough.

Then everyone came up to congratulate us, and we shook hands with big grins on our faces. We took a couple of pictures, approved the quote in the press release, and talked with the Amazon folks some more. All great stuff.

Finally, we headed out for a celebratory dinner. Once again, thanks to everyone in the company for your hard work – we did the talking, but we could not have done this without all of you.

Hooray!

We were delighted to learn yesterday that Yieldex was selected as a finalist in the Amazon AWS Startup Challenge. Seven companies were selected out of probably 100’s that applied (apparently 900 applied last year, don’t know how many applied this year). We even got a TechCrunch mention – can’t wait to see what that does to our web site traffic. For the record, our web site is intentionally vague – we didn’t want to really launch the company until we had a few customers up and running – and we’re getting close.

We view this as a great validation of our sophisticated technology for solving the complex and difficult problem of maximizing the value of premium inventory for large web sites. By using cutting-edge software that takes advantage of the unique capabilities of the cloud, coupled with our patented engine, we are able to tackle these challenges that have resisted commercial solutions for a decade or more. Congratulations to our development team – they deserve this!

Sometimes as an entrepreneur you just gotta roll with the punches. Last week I had a week-long trip to NYC, Philly, and DC to visit customers and prospects. The morning I was to get on the plane, I woke up with the whole left side of my face throbbing. I managed to get in to my dentist first thing, who discovered an abscessed (infected) wisdom tooth. I spent the whole week on amoxycillin and vicodin, napping between meetings in Bryant Park. Frequent caffeine injections ensured I had energy for presentations, and I managed to power through with reasonable success.

Friday night, on my cross-country flight home in the very back row (the one that doesn’t recline), my legs started itching. I thought it was just travel pains, but it turns out I’m newly allergic to penicillin. Fortunately, the infection was mostly gone at this point, so I survived the weekend on vicodin. Monday morning at 7:30am I had the tooth pulled, and switched to a regime of cipro and ibuprofen. Fortunately the swelling went down quickly, and I started to attack the mountain of work that piled up over the last 10 days.

Then my Macbook froze. Hmm – that never happens. Oh well, reboot. Hmm. Nothing happening. Then a folder appears with a blinking question mark. Uh oh. Looks like another day’s productivity shot. Good thing I bought a $350 desktop machine for web surfing – I can still get a lot of things done. And I use FolderShare to make sure all my key documents are synchronized across my laptop and home machine. But I still had to make an appointment with the Genius Bar to get the hard disk replaced (it was shot). Then I had to go back and pick it up. Now I have to re-install all my apps. There was a time when I would have really looked forward to this task, but right now? Ugh.

And don’t even get me started on all the people forwarding the Sequoia presentation and asking me if I have 2 years of cash in the bank.

It’s been a tough couple weeks, but I’m rolling. Keeping a positive attitude. The important things, family and overall business, are doing well. Things are looking up.

Ah, the first customer. No other single event is as important and nerve-wracking to an enterprise software company as getting your first customer up and running. Fail, and the ensuing reputation damage could kill your business. Succeed, and the reference will set you up for a much easier sales effort to the next one. Not to mention the effect on employee morale, investors both current and potential, and (heaven forbid) your revenue line.

You know there are a few things not quite done about your product yet, but you think most of it is there, and you can manage around the rest. You know that you’ll learn some things from how the customer will use it, but exactly what is still unclear. You think you know how to deploy it, but some of the integration challenges are still opaque. As somebody said, you’re 90% of the way there, and the last 10% takes the other 90% of the time.

Choosing the right first customer is essential. Someone with a champion willing to work with you through the inevitable obstacles that will crop up. Someone with a problem hard enough that your solution delivers significant value, but easy enough that your alpha-quality solution doesn’t choke. Someone name-brand enough to provide a strong reference.

In my experience, setting expectations is the hardest part. You don’t actually have any idea how long it’s going to take to deploy, but the customer wants an estimate. You don’t know exactly what the main value propositions are, because you don’t know exactly how they’ll use it, but you had to say something to sell it to them. And you want to leave yourself enough wiggle room that when you finally do deliver something of value, you can declare success and say that was your plan all along. This is a balance beam that’s hard to walk.

Final piece of advice: listen to your customer. Don’t just listen politely, but really dig in and listen hard. Spend a lot of time with them, both in the office and out. Learn why they think you can help them, and understand their own motivations. Watch them in their daily work, both with your product and without, to understand what they do and how they see the world. These things will help you work through the challenges, deliver a product that they love, and give you the foundation of a successful business.

We are riding the typical start-up roller coaster. Some days are absolutely great, others not so much. Here’s a good example.

I’m in a contract negotiation process with a major media company. Awesome – they want to use our product! And they’re willing to pay for it! Wow, okay, let’s do it. I send them a proposed contract. They get their lawyers involved. They decide they want to use their contract template instead. Hmm – then why did I spend the money to have my lawyer do the first draft? Their template is totally one-sided, but we work with it, mark it up and send it back. They send it back again. We finally put together a conference call with their business folks, their lawyer, my lawyer, and me. The call takes a while, but goes well: we hammer out all the substantive issues, and get close to signature.

Here comes the kicker. The next day, their lawyer goes on paternity leave. Hey, I know how that is, some things you can’t plan. Bummer is, the new lawyer they put on it looks at the contract, says “no, no, no” and shoves in a dozen more major redlines, completely changing the deal. Argh! Another round of back and forth markups, another major conference call, a late-night conference with my lawyer to get it turned around, and finally we’re done again. It cost an extra week and a few more thousand dollars, but we got it done. Now, the real work begins.

Every company has a “how we got started” story. For example, here’s the NetGravity startup story. This is the story of how I got involved in Yieldex.

First, a little background (bear with me – this is relevant). After we sold NetGravity, and I took some time off, I was thinking about a career change: get a PhD and become a computer science professor. I’ve always loved to lecture (a trait shared by many VCs, which is not necessarily a good thing), and I thought I might enjoy the pure intellectual stimulation of academia.

I began by looking for an interesting topic, because I got some advice from professor friends that most PhD students spend the first couple years just trying to pick their thesis topic. One hard problem we had worked on at NetGravity was the “overlapping inventory” problem, so I wrote a short paper on the topic to present to the HPTS Workshop, a fairly exclusive enclave of the top database academics in the world, including Jim Gray, Ed Codd, and Michael Stonebraker. Mostly I wanted to see if they could tell me if the problem had been solved before. I got generally good feedback that it looked like an interesting and unsolved problem.

For a variety of reasons, I ended up going into VC instead, and put the problem on the back burner.

Doug Cosman was one of the key employees at MatchLogic, another early internet advertising startup that was bought by Excite. Doug’s work after Excite led to the key insights that underlie the Yieldex technology, and he raised some angel funding to pursue developing those ideas. Doug was searching patents and other sources for prior art during his patent application when he came across my paper on the HPTS web site, which by then was ranked highly by Google. In a fairly random coincidence, one of Doug’s angel investors at Sequel Ventures, Chris Scoggins, is a friend of mine, and put Doug in touch with me directly.

I have to admit, I was pretty skeptical that some guy in Boulder had solved a problem that had pretty much stumped the industry for the better part of 10 years – classic Silicon Valley arrogance. I put off talking to him for some months, but fortunately he was persistent. Finally he came out to visit, and in a four-hour session with the whiteboard, convinced me he had a novel and workable solution.

Learning about his solution re-ignited my own interest in the problem and the space. Of course, it didn’t hurt that DoubleClick had just been acquired for $3b and aQuantive for $6b, and the space was hot in general. The more phone calls and meetings I had, the more clear it became to me that this was still a huge problem for the industry, and that nobody had solved it well. Also, for me personally, the process of doing diligence and getting back in touch with a number of people reminded me that I had a lot of personal credibility and expertise in this area. Very quickly I made the personal transition from wanting to invest to wanting to be involved.

Fortunately, Doug and his angels had already talked about hiring a CEO in the Bay Area, so it was fairly straightforward from that point on.

The Woodside guys have been great to work with, they have been incredibly supportive and helpful. They invested in the Series A, and I’m still very much a part of the Woodside Fund family, now as a Venture Partner and a portfolio company CEO instead of a Managing Director.

I’m looking for a product manager to own defining the features and functionality of our product. Here’s the spec, please let me know if you know anyone. Thanks!

Senior Director of Product Management

Brand advertising dollars are skyrocketing on the internet, and publisher traffic growth is not keeping up, creating a pressing need for optimization tools that give publishers the inventory control required to capture these ad dollars. Yieldex is a venture-funded startup with patent-pending optimization algorithms, built by some of the folks who invented the first online ad systems at NetGravity and Matchlogic.

Our next key hire is a product person, someone who knows the ad operations side from inside and out, and can make sure the product we build has the “wow” features that deliver huge value to our customers, without neglecting the required functionality that customers need. Ideally this person has worked at a publisher or ad network between ad sales and the ad technology group, and knows both how the sales process works, and what existing systems are currently capable of. This position could be Senior Product Manager, Director or even VP level, but we need a doer, not a manager. This person will be gathering feedback from customers, writing functional specs, and working with the engineers on a daily basis to refine the product for the market. Key attributes are the smarts to integrate lots of complex input, the ability to work with both customers and engineers, and the organizational skill to make sure nothing falls through the cracks. Actual product management experience is a plus, but not a requirement.

The engineering team is located in Boulder, CO, and the business team is in San Mateo, CA. This position could be either location, but would require some travel between them, and in particular would need to spend time with the engineers in Boulder. There would also be travel to customers.

Please contact jobs at yieldex.com to apply. Thank you.

It’s clear to me now that I’ve always had an engineer’s disdain for sales people. After all, how hard can it be? Our great product practically sells itself. As a CTO, the sales calls I went on were all easy and almost fun. My job was to talk up the features and functionality of the product, and wow the customer with how smart we were and how great the architecture was at solving the problem they had. No problem. How little I knew about the constant follow-up, the customer requests, the research and preparation and effort that went into understanding an account well enough to close a million-dollar sale. Now that I’m the head sales guy, I’m learning the hard way. My only hope is that I’ve started to understand how little I actually know, and I’m getting much better at asking for advice and coaching.

I had a classic sales situation the other day: a champion at a top prospect who loved our product, and the next step was to vet it with the technology folks. We set up a conference call for two weeks out. Then it was rescheduled for two more weeks out. Then they sent an Outlook appointment update – not even the courtesy of an email or a phone call – to reschedule again for over two months later. Then our champion left. Poof – no more top prospect. Of course, as an entrepreneur we never say die, and I’m back in there trying to make progress, but this is the startup roller-coaster.

After a stint as a VC, some parts of being an entrepreneur seem easier. For example, it’s much easier to see things from the investor and the board perspective, because you’ve been in their seats. You know how to pitch to investors, and what information they need. You know what is relevant to the board and what is not, and generally how to handle a board meeting.

There are a few things you forget after being a VC for a while. Hiring and recruiting is harder than I remembered – not the sales part, but just finding people and interviewing them. Making tough decisions about how to spend your limited cash and other resources is harder than I remembered. There are a million and one details that you don’t have an executive assistant or a CFO to handle for you. Travel planning alone is a time sink.

I have to reach out a lot more proactively. I didn’t realize how easy it was to just answer the phone and email all day, but as a VC, a lot comes at you. When I was a VC, it took incredible discipline for me to put that aside and actually be proactive, and I wasn’t doing it very well. As a CEO, the phone doesn’t ring much, which means I reach out a lot more.

One other thing that is much easier as an entrepreneur is the focus. I find that my top few priorities are quite obvious, and I’m not really at loose ends about what is most important to be working on right now. Sometimes there are too many top priorities, and it’s almost paralyzing, but mostly I can just crank without too much reflection. As a VC, I found that much harder. While there were still a million things to do, deciding which ones were priorities was much harder for me. Of course, there were some obvious times when we were doing financings and such, but often I had many different potentially valuable things I could do, and no good way to decide between them. And the feedback cycle was so long that it was hard to even come up with good rules of thumb.

I travel a lot more now, visiting potential customers and partners, and my kids are having to adjust to having me gone more, which can be heartbreaking. I’ve been lucky to have dinner with my kids an awful lot the last few years, and that’s getting harder. But my family definitely senses my excitement and enthusiasm, which helps a lot.

By the way, I’m not the only one who has done this. Danial Faizullabhoy also did this relatively recently, you could ask him what it’s like. Other folks I know who made this transition are Darlene Mann and Perry Wu. There are also VCs who occasionally step into CEO roles for a while, like Alex Mendez at Storm Ventures.

When I went to the “dark side” and joined a VC firm, everyone asked me how it was different from being an entrepreneur. There were a couple of obvious things, of course: you suddenly become a lot better looking, for example, because everyone wants to talk to you. You trade pesky customers for pesky investors and entrepreneurs. You have no direct reports, but have to learn how to influence big egos on boards. You don’t actually do anything, but you talk on the phone a lot, and have lots of meetings. You get home for dinner with your kids a lot more often.

Mostly I loved the intellectual stimulation of having a really smart person or team come in and passionately pitch their best idea to me. I had to assimilate a lot of information, and learn to think at a pretty high level, just to ask decent questions. Getting to do this several times a week was a fabulous experience.

So why did I leave? What’s not to like?

I missed the feeling of taking real risk, the kind of risk that makes you feel alive. I wanted to build something of my own, and feel the energy first-hand again. Go to sleep at night thinking about something, and wake up energized to start working on it. So when the stars aligned to present a huge opportunity perfectly suited to my experience and abilities, I left my cushy job to jump on it.

I have big news: I’m going on leave from Woodside Fund to become CEO of a brand-new startup called Yieldex. We are developing online ad optimization and inventory management technology targeting publishers and ad networks with a focus on display advertising. Yieldex was founded by Doug Cosman, a MatchLogic guy who has invented some amazing technology for inventory management and ad optimization. As it happens, I wrote a paper on this topic a while back, and considered it as a PhD thesis topic before I was seduced by the Dark Side of venture capital. So when I saw this technology, I saw a unique opportunity for me to jump back into the game.

We just raised our Series A, from Sequel Ventures, First Round Capital, and Woodside Fund. I am now building out the team, and starting to sign beta customers.

Watch this space for more entries on what it’s like to transition from VC to entrepreneur. It’s great to be back!