Tuesday, September 27, 2016

There are Some Good Ones

Much of my writing is about pointing out the darker nature of the VC/startup/tech media ecosystem, and that is most easily highlighted by covering the mismanagement, fraud, corruption, and stupidity that's prevalent in it. There are, however, some intelligent, considerate, capable, and honest startup CEOs and investors out there, and I very, very occasionally have had the good fortune to work with them.

In 2013 I was running my own consulting company, mostly doing ultrasound and medical imaging work, but having led a software development business for some years I was occasionally contracted to work on software projects. A mutual friend introduced me to Anil Sethi, a veteran of three successful startup exits, looking to change the healthcare system with the company he had co-founded, Gliimpse. To quote some recent articles, the goal for Gliimpse was to "create a platform for securely collecting, managing, and sharing private health records", "turning information from labs, hospitals, and pharmacies into a single shareable report."

I was with Gliimpse in its earliest stages for several months in a variety of roles, helping his team get the company started, fundraising, and advising on business strategies and approaches. It was a great experience working with Anil, watching how he ran his company, placing the security and privacy of data first and foremost (even ahead of MVP delivery), and for the first time seeing a CEO treat their employees as valuable team members with thoughts and desires of their own. Until then it was my experience that a CEO would pay lip service to 'valuable employees' but still do everything to underpay and demoralise their staff, and react angrily when they would have the temerity to request fair pay or reasonable better conditions. There were several times with impending deadlines and deliverable dates that things grew stressful, but being part of that team and knowing that the CEO actually appreciated the work kept me pushing through.

I was beginning to approach full time even as a consultant, and during this time I also started doing consulting work for another company - for a period I was working a combined 80 hours a week. Something had to give, and I had to make a choice which to go with - and to my occasional regret I went with the other company, it had an extremely challenging problem I was interested in working on that would test the skills I had learned over the previous two decades.

As I ended my work with Gliimpse, Anil asked if I would consider joining the Advisory Board and continue helping them with business strategy and acting as a sounding board for him, and I agreed. (Yes, I know I've commented on some uses for Advisory Boards, but as I noted there they can be done well too) It was another interesting few years as Gliimpse struggled and grew, and watching this CEO be a decent ethical human being while running his company, and for once the good guys won - Gliimpse was purchased by Apple earlier this year. I couldn't be happier for Anil, his cofounder Karthik Harriharan, and all of the Gliimpse team, they absolutely deserve this success and I'm looking forward to seeing how the resources of Apple can propel their vision forward.

Now I have a hard rule learned through years of mistakes, and that's whenever you work you don't work for promises of future rewards, that everything is on paper, legally binding, and cash. It's unfortunate as study after study shows that high trust societies are more efficient, and result in greater economic gains for all. It can be a short term gain for someone to abuse that in a high-trust society, to get employees to commit effort on the reasonable expectation of fair future compensation that somehow never materialises. Beware the CEO who proclaims their fairness and promises huge rewards "when you prove yourself", but acts insulted when you ask for that committed to paper. The recent publicity around WrkRiot is a good example of this, and it's not an isolated case in my experience. Those CEOs who view the world through a 'zero sum' lens may gain for themselves in the short term but often impoverish society as a whole.

Anil is one of the very, very few whose word I would trust to actually deliver on his promises. How did he earn that trust? You don't see him publishing articles on his amazing backstory that ignore the company and team, he doesn't proclaim his genius and take credit for the hard work of others, doesn't give lists of "13 things I've learned as CEO and you should too", sacrifice employees well-being on the altar of an impractical "mission", or sit on conference panels taking pointless softball questions simply for the publicity. Instead, he gained that trust by acting consistently, honestly, ethically, rationally, compensating employees fairly, and being true to his word even under difficult circumstances. 

That's all. It seems simple yet so rare to find, and the story here is one that is easily missed - that this being Anil's 4th exit as a founder is not despite his character, but in large part because of it. There are others like me who have worked with Anil before, who will take his word and commit their resources to a project because they know him. He asks for help, he'll get any help I can provide, without looking to contracts and negotiations first. That trust is hard to earn, and easy to lose, but if you want to look at it in purely economic terms, is near priceless - yet the short term gains of burning your employees seems to be the preferred route today. To all the current and aspiring CEOs out there, I'd urge you to take a page from Anil's book, and when you're under pressure look not just to your current startup but the next one and the one after that. Even once you have VC money, there are some things that it just can't buy.

As for the other company I chose to work for instead? Well that was called uBeam. You may have heard of it...  

And in other news...

I've not been commenting much on uBeam lately - there's really no need, I've said pretty much what I felt needed saying, and I'll wait for the post-mortem to take much more time out my life to talk about them - but there have been a couple of events recently that warrant at least a couple of lines.

The first is an article that appeared in Epic Magazine in July, "Silicon is Just Sand", a sizable piece by author Stephen Elliott on Silicon Beach, regarding the growth of technology companies in the Venice/Santa Monica area. It's a nicely written piece that gives a great flavor of the people and culture in Silicon Beach, it reminded me of my time there, and his sarcastic responses to many of the more ridiculous parts lend the feel of "the only sane man in the asylum". Each of the many sections is devoted to a different person or company, with a particular thread running through it. uBeam, however, earned two sections to cover the extraordinary fit of self-destruction that an industry friend of mine described as "managing to shoot themselves in both feet with a single bullet". (Sections 8 and 9, but I encourage you to read it all.)

I'm not going to go line-by-line through the jaw-dropping hilarity of the article. It speaks for itself, just read it. My personal reaction to it was "Yep, sounds like a typical day at uBeam" and I laughed as he was taken from believer to skeptic and closed with "Fake it till you make it".

Second is an announcement from uBeam, which can be found here. The headline is that they've hired an SVP of Engineering, Larry Pendergass, who is a big name and is another tick-box in the needed list for Series B funding. Congratulations, I'm sure this means they are about to give a public demo and release a commercial product any day now, as promised.

What's more interesting, though, is what's not said. First of all, this was picked up by exactly zero press outlets that I'm aware of. A year ago this would have been all over the tech media news, but even Techcrunch didn't touch it. Was this deliberate? If you self publish seemingly important company news last thing on a Friday afternoon it's usually an attempt to bury it, but I'm also wondering if the services of uBeam's PR team are "no longer required" following the above "Silicon is Just Sand" debacle and it's the B-Team that are running press releases now. It's garnered a whole eight likes in the three weeks it's been up, which is about half the number of likes I have on my lowest viewed LinkedIn article and I'm a nobody. It seems the sparkle has dimmed a bit. 

Next thing hidden in there is that it sounds like my replacement as VP Acoustics has "graduated" to the advisory board after about 7 months in the job. Perhaps I can add "gives the company a less embarrassing exit route for departing executives" to the list for reasons to have an advisory board? I'm not sure who is on the team now that has any extensive ultrasound experience, it'll be interesting to see who my replacement's replacement will be. I'm sure he'll be the cream of the crop.

I do love the pictures of what looks to be a monster office in San Jose (8500 sqft or so given landlord data?) for what is now two employees. I'm sure that's been a necessary expenditure over the last few months in light of the imminent product release and huge expansion.

That's it, not much more to say here. Back to more important things.

Update: Rather than do a new post, I thought I'd add this in here:

uBeam are now advertising for a Director of HR. If you are interested, one of the key requirements is:

defining the couture (sic) best able to position the organization as the leader in the market place

so I guess a stylish uBeam uniform is the last thing the company needs before releasing their demo and product by the end of the year? There's a simpler way to ensure they get the job - don't come to the interview through the door, just break in through a window. And if you get rejected, turn up for your first day of work anyway, only losers take 'no' for an answer.

Wednesday, September 21, 2016

The Emperor's New Clothes

A few weeks ago Nick Bilton of Vanity Fair wrote an article on one of my favorite companies, Theranos. "How Elizabeth Holmes' House of Cards Came Tumbling Down" is a fascinating piece, not because of any particular revelations but because it highlights so well the mentality and attitude among certain Founder/CEOs, that they simply don't play by the same rules as you or I, that the narrative of a company is far more important than the reality, and that this behaviour is both enabled and rewarded by VC and tech media.

There are a few points in the story regarding Holmes and Theranos I'll come back to in future posts, however one section in particular hit home for me. This one section of the article reminded me why I'm not a journalist, as in just over a paragraph, Bilton summarises everything about the Venture Capital/Tech Media/Startup ecosystem I've been trying to highlight in this blog, and does so in a way that almost anyone can understand:

While Silicon Valley is responsible for some truly astounding companies, its business dealings can also replicate one big confidence game in which entrepreneurs, venture capitalists, and the tech media pretend to vet one another while, in reality, functioning as cogs in a machine that is designed to not question anything—and buoy one another all along the way.

It generally works like this: the venture capitalists (who are mostly white men) don’t really know what they’re doing with any certainty—it’s impossible, after all, to truly predict the next big thing—so they bet a little bit on every company that they can with the hope that one of them hits it big. The entrepreneurs (also mostly white men) often work on a lot of meaningless stuff, like using code to deliver frozen yogurt more expeditiously or apps that let you say “Yo!” (and only “Yo!”) to your friends. The entrepreneurs generally glorify their efforts by saying that their innovation could change the world, which tends to appease the venture capitalists, because they can also pretend they’re not there only to make money. And this also helps seduce the tech press (also largely comprised of white men), which is often ready to play a game of access in exchange for a few more page views of their story about the company that is trying to change the world by getting frozen yogurt to customers more expeditiously. The financial rewards speak for themselves. Silicon Valley, which is 50 square miles, has created more wealth than any place in human history. In the end, it isn’t in anyone’s interest to call bullshit.

The only thing I'll disagree with is the last sentence - it is in almost everyone's interest to call bullshit, just not those currently profiting from the system. The misallocation of society's resources, both in straight cash invested and the working efforts of thousands of the smartest and most talented people on the planet, harms us all. These events have impact beyond just the company and the investors - imagine during Theranos' positive publicity peak in 2015 a scientist promoting their genuinely amazing blood testing technology to VCs, that truly does everything they claim, yet does not meet the fantasy specs touted by Theranos. How well do you think they fared in the fundraising? Exactly. What life enhancing technologies may we have lost because investors demand founders willing to be flexible with the truth?

In the past, I've sat inside a company watching the CEO engage in a war of fantasy performance stats and delivery dates with a competing vaporware company, using the tech press to launch salvos of ever increasing capabilities. When the enemy returned fire with a further 'improved' product, there was panic at the top and demands made to engineering that our product get better or timelines be shortened - statements from those trying to be rational, such as "No. Their numbers are just as made up as ours.", garnered a mix of confused and annoyed looks.

Neither company has, to my knowledge, released a product since then and in part this is connected to these inflated performance promises. It may have been possible to produce a more modest and realistic package that engineering originally wanted to do, but demands for "Perfect. Now." tend to wreck the ability to build anything of quality.

Many people have no problem dealing with bullshit in their working lives, and in fact for many in the legal, marketing, and sales side of business it's an intrinsic part of their day (apologies to the ethical ones among those groups!). Some drink the Kool-Aid and believe, some know the reality but the paycheque keeps coming in and it's not too important anyway. With engineers though, it's different. Our ability to perform and deliver in large part depends on our ability to spot falsehoods and mistakes, the desire for things being 'correct', and our inability to lie to ourselves about the reality of the situation (at least as far as the technical is concerned).

I rarely see engineers quit over pay (except when large inequities are made very clear), but I do see them quit over death march projects or managerial destruction of a long term and rational approach to delivering a product. If they don't quit it's common to see engineers continue on despite the conditions, desperately trying to save the product in the mistaken belief that either they have some form of personal responsibility beyond their employment contract, or that they will ultimately be rewarded for their perseverance when finally things are done. To their own detriment, this can result in significant personal health issues due to the stress, depression that can take them years to recover from, or even in the case of Ian Gibbons, the Chief Scientist for Theranos, can tragically end in suicide. Investors and tech press laud the dedication founders have to their company, to the perseverance, but forget the sacrifices made by those who don't have a 50% ownership in the profits.

In reading this piece by Nick Bilton I realised that the internal divisions I have experienced in companies are often between those who believe or profit from the bullshit, and those who either cannot or will not. It's the common "C-suite vs Engineering" - and in almost every case the former 'win', at least until the point it all comes crashing down. Why? Because making today look better, even at the long term expense of a worse tomorrow, is most profitable for those at the top. This shows up whether it's salesmen pulling forward orders from future years, CEOs cutting R&D for future products to make the bottom line better, or founders and investors "putting the most positive spin on things" (to be polite) in order to sell on to a greater fool.

It looks like the federal government may be cracking down on abuses that have been growing over the last few years, and Theranos seems likely to be the precedent. In my opinion we'll be seeing a rash of prosecutions of startups by the SEC, FCC, FDA, and other regulatory agencies over the next few years, and some very large investments will become worthless. They'll put it off as long as possible, but once it starts to hit the pockets of the large investors, suddenly we'll hear that it is in the interest of everyone to call bullshit. Here's hoping that comes sooner than later.

Friday, September 16, 2016

A Whole Lot of Nothing

Energous had a rally in their stock recently, having reached around $18 from only $14 a day or so ago. What happened to cause this rally? Perhaps a product release? A deal announced with a major customer? A licencing deal on their technology? Something to show a product or revenue?

No. Someone read a two year old prospectus and jumped to the conclusion that a deal with Apple existed because the word "Apple" was in the document somewhere. And based on that, the stock rallies from $14 to $18 in 2 days. Here's the wording, image taken from the VentureBeat article:

Let me translate - they expect (but don't confirm) that their products will go through a variety of tests (Apple compliance being one of them), and that this list of tests may change. That's it. Nothing more. Nothing about a deal. Reading anything more into this is just putting your own biases and hopes into it.

I've watched from inside a startup as the tech media made rampant speculation about what we were doing, the technology we had - it was based on nothing, with ridiculous expectations, but it benefited the company for this to continue so why dissuade them of their opinion?

Energous are a publicly traded company, the SEC can get upset if they mislead or leak information, resulting in criminal charges. I expect everything they say to be 100% factual but worded in a way that lets you draw other conclusions if you are so inclined. I've talked about how you can word a press release to make it sound like so much more has happened than actually has.

Take a look at the stock price for WATT (Energous) over the last 3 months. Notice the rises then large drops, such as the $12 to $20 rise from July? That's the rise before Apple events, then the fall at 2pm on the day the Tim Cook doesn't announce Energous wireless charging in iPhones. Expect that to keep happening, someone is making a lot of money on this volatility. 

This is a non-story. The real story is the genius of the Energous team - either the genius in making RF wireless charging possible, or genius in how to earn millions in developing a product that can likely never actually work or get regulatory approval all while never actually lying and staying legal within SEC rules. I know which of those two I think it is.