Innovators, Imitators and Idiots

Hi. I'm Stu Wall, the CEO of Signpost.

August 10, 2012 at 11:46am

The 5 Golden Rules of an Outstanding Sales Team

An article I published on the Huffington Post earlier this week:

1. The best sales reps are trained, not born.

Some will argue that sales talent is something you’re born with, but we believe coachability wins over natural talent and experience — particularly for a high velocity, low cost salesforce. Great salespeople listen, learn, and adapt. New reps can be trained through a highly structured and organized onboarding process. At Signpost, reps’ desks are set up when they arrive and the first training week is scheduled to the hour. It doesn’t stop there. Always be training. Training sessions should be consistent (ideally the same time each week), interactive (create a dialogue, not a deck), and based on buy-in from reps (recent roadblocks, new strategies, etc). At Signpost, we also strongly encourage lateral mentorship. Reps share tips with each other through email, IMs and Yammer.

2. Motivation beats micromanagement.

We believe motivation drives all other metrics. We’ve seen company morale drive huge swings in performance at a level that can’t be replicated through micromanagement, rules, or intimidation. We maintain an environment that keeps morale high — we play music, create teams, organize small activities to break up the day, and reinforce reps’ connection to rest of the company through cross-departmental committees and group outings. Contests have also proven to be extremely powerful. Competitions should be short, unpredictable, and fun. We like to build contests around all parts of the funnel (deals closed, leads created, talk time, etc) and incorporate physical activities (golf putts, ping pong). Rewards can be more creative than just cash: let reps leave early on a Friday, add them to a “hall of fame” when they break records, or give airline vouchers to use toward vacation. 

3. Make selling a layup.

The first and most intuitive step, of course, is building a great product that’s easy to sell and drives a great ROI for the buyer. The next step is optimize every step of the sales process. Make signing up customers quick and simple. Lower the friction for internal technology and leverage outside tech tools (Leads360, Use every piece of data you have to bring call-to-close time down, and call volume and hit rate up. Don’t waste time having sales reps prospect or nurture after closing— prospecting provides excuses not to call, creates redundancies, and leads to fighting over deals. Account management also distracts from building new business: reps are hunters, not farmers.

4. Manage your managers.

The player-coach paradigm does not apply to the rep-manager relationship. A sales manager’s job is to make sales reps’ lives easier. In order to do so, they need the proper amount of span and control. 10-12 reps per manager is an ideal ratio, as it gives them enough work to justify the role, but not too many shoulders to look over. Managers should constantly be surrounded by reps, listening on calls, and training on the spot when necessary. In a perfect scenario, they are almost invisible except for during formal training. In fact, you can judge the strength of a sales team by how it performs when the manager is away. We’ve also learned that sales reps are not necessarily the best sales managers. You should therefore structure the promotion track wisely. Don’t make promises around timeframes that you can’t deliver— this will only hurt your credibility as a leader and even worse, lower collective expectations. Also avoid creating a labyrinth of layered hierarchies: this will raise your overall CPA while allowing for communication gaps and cultivate an unproductive kind of competition between reps. 

5. Transparency drives performance. 

Perhaps the most powerful thing we’ve done at Signpost over the last six months is track goals visually in real time. We’ve found extraordinary success through our sales dashboard, which adds a bit of gamification, holds the team accountable, and clearly quantifies the distance to upside. Reps know by looking at the dashboard exactly where they are at any given point in time and how far they are from hitting bonus numbers. Accordingly, bonuses should be straightforward, justifiably fair, and effectively communicated from the outset. In the event that quotas aren’t reached, a brief grace period or performance improvement plan can be instrumental in giving reps an opportunity to improve over a finite period of time. At the end of the day, it’s easier on both parties to hire fast and fire fast. When a rep is let go, communicate the change quickly to the team and hit the positive. Highlight the difference between terminations and layoffs, and reinforce the importance and collective benefit of building a team that’s strong all around. 

August 18, 2011 at 4:39pm

5 things you should know before starting a company

I posted this on VentureBeat this morning. The original article is here:

Despite the rocky nature of the stock market these days, it sure seems like a great time to start a company.

The stories of early stage founders graduating from Y Combinator and TechStars with $8-$10 million pre-money valuations soon after graduation are encouraging. And late stage valuations appear to be equally generous, with LinkedIn trading at a 554x P/E multiple on the day of their IPO.

These seemingly outsized returns are attracting a new group of aspiring entrepreneurs, who often leave MBA programs and business careers to try their luck at a startup. I was one of those people last year, leaving a private equity job to start a consumer-facing company. Here’s some of what I’ve learned in making that transition.

Customers normally aren’t free – We spend most of our days using products that have experienced extraordinary viral growth. Facebook, Twitter, Foursquare and more recently, These businesses inspire a disproportionate number of startup ideas that rely on viral adoption to justify a low or unknown customer value.

Unfortunately, most ideas aren’t so useful or well executed. High unit margins (customer lifetime value – customer acquisition cost) support predictable growth and execution mistakes. Groupon, the fastest growing company ever, spent $480M in consumer marketing arbitrage to acquire subscribers worth $30 for $5.40 each.The company has also enjoyed a relatively high viral coefficient (k factor) in early days – but it didn’t simply rely on that buzz.

You undervalue disciplines that you don’t understand – Despite a significant number of blogs on the topic, an alarming number of initial discussions with first-time founders go as follows (brackets for my interpretation):  “I’m going find a [horrible] computer programmer in the next few weeks. I’ll ask them to do all the [product, design and] coding work based on some PowerPoint slides I made. I think I can negotiate a [unfair equity] contract, then hire more programmers after I get funding [because of the product the first one built].”

I’m using hyperbole, of course, but my main concern is that business founders rarely allocate enough resources behind tech, product or visual/UX/UI design. It’s not because we’re dumb, it’s just that many barely understand the complexity of coding and product development.

If this sounds like you, remove “normally” from the previous lesson. You will certainly pay for customers. Non-tech/product founders who aspire to create a viral consumer facing web property are like tennis players trying to win an NBA championship.

Don’t worry about people stealing your idea – Teams without execution experience often assume the first person with a great idea is almost certain to succeed. The lack of focus on execution reminds me of the SouthPark episode on underpants gnomes: Phase 1: Great idea -> Phase 2: ?? -> Phase 3: Profit!!

By the time Facebook launched in 2004, Friendster, a competing service, already had 3M users – roughly the same number as Foursquare in Q4 ’10. Friendster’s success drove scores of copycats. Like Facebook, most category killers weren’t the first to execute an idea; they were the ones who executed better than anyone else.

Put your business plan on SlideShare. Present at Meetups. Tell potential co-founders what you’re doing, get them excited about it, and learn from their feedback. If you do succeed, it’s unlikely to be repeatable anyway.

You won’t get it right on your first try – Unless you’re copying a proven business model, you probably don’t know who your customers are, what they want, or what they will pay for. It’s nearly impossible to answer these questions with research. The best tool for most consumer startups involves rolling up your sleeves and building something ugly, seeing how people use it, making it better, then repeating the process.

Many new founders seem to pursue a zero iteration strategy. This often involves hiring a contractor to design or code a site that won’t care if something breaks, let alone execute another turn. When things don’t go well at launch, the inability to iterate leads to businesses untimely demise.

Don’t be discouraged by FOMO (fear of missing out) – The newness of a company can be deemed press worthy. Postabon, a tiny bootstrapped startup that I built part-time, was named in “The 10 Companies That Will Matter in 2010” by PC World. It was a distinction we shared with Google Wave.

The average startup isn’t able to capture the full value of PR via sticky traffic, subscriptions or revenue. PR can be a cheap way to identify leaks in your product; just don’t seek more water at the expense of fixing the bucket.

August 2, 2011 at 5:08pm

Innovators, Imitators and Idiots

How Groupon and 491 Daily Deal clones destroy capital on email marketing

I originally posted this on on Business Insider here: 

On Groupon’s warpath toward a $20B IPO, the company is spending $2.3M a day on consumer marketing – roughly twice as much as Target. Last Wednesday the SEC rightly criticized Groupon for removing this marketing expense from their profit equation. Accounting should be the least of their concerns. According to data in the company’s S1, Groupon is now earning a negative return on their $800M marketing budget.

Daily Deal companies use every available marketing channel to grow their subscriber base. Ads on Google, mobile banners, radio and TV commercials… you get the idea. More emails not only drive more sales, they also make up for the “leaking bucket” problem: every day some percentage of Groupon’s existing subscribers turn off their newsletter, subscribe to a competitor or stop making purchases all together.

Groupon spent $5.65 for every new subscriber in 2011, a 152% from the price paid during the same period last year. At this rate Groupon would now be paying over $7. Why the huge increase? As hundreds of Groupon clones began to compete with Groupon for the same consumers, advertising became more expensive and less effective. 

So is an inbox worth $7 or even $5.65 to Groupon? In 2010, the company generated $61M in adjusted profit (CSOI), a value of $1.20 per subscriber. Hmm… That doesn’t look good.

Groupon believes the value is much higher, as they’re likely to profit off each subscriber long after the year they were acquired. Daily Deal marketers use three assumptions to calculate each consumer’s lifetime value:

  • How often does a subscriber make a purchase? In Q1 ’11, Groupon subscribers purchased at an annualized rate of 1.35 deals per year.
  • How much money do we make when someone purchases? Groupon’s average price point in Q1 ’11 was $23. At their adjusted profit margin of 13 percent, Groupon walks away with $2.98 for every transaction.
  • How long will a consumer remain a subscriber?Groupon doesn’t give us this one. Let’s conservatively assume .1 percent unsubscribe each day.

Plug these numbers into a Google Spreadsheetand you get a lifetime value of $4.86 for Q1 ’11, a 64 percent decline from Q2 ‘09. Insiders refer to declining lifetime values as the ‘tragedy of the commons’: the value of an inbox decreases each time a subscribers adds a competing service. Groupon’s most active consumers now get five to 10 daily emails from competitors.


The resulting CPA vs. lifetime value chart is something Groupon is unlikely to bring to their road show. Groupon is on track to earn a negative 52 percent return on every dollar they spend on email marketing.

Why would the company continue to make an ROI negative investment? Groupon has dozens of strategy and marketing executives who almost certainly run a version of this analysis. I think Groupon’s seemingly irrational marketing spend is driven by a combination of three factors:

Groupon believes the actual consumer lifetime value is far greater than it is today

The company’s working on a number of initiatives to better monetize consumers and merchants – notably deal personalization and Groupon Now! This would require a significant change in trajectory; lifetime consumer value has decreased for six of the last eight quarters despite multiple product releases.

Email marketing is a sacred cow

Email marketing is in Groupon’s DNA. Dozens of employees spend millions of dollars daily. Analysts are discouraged from approaching their exceptionally wealthy bosses with a presentation that calls for mass layoffs and slowed trajectory.

Groupon believes markets are irrational

LinkedIn’s 554x P/E ratio is proof that public markets now value momentum more than business fundamentals. Groupon could shut off their marketing spend and be “profitable”, but slower growth would have a significant adverse impact on their valuation.

My company,, disengaged consumer marketing in January ‘11. We subscribe to a Warren Buffet framework: in every market cycle, there are innovators, imitators and idiots. In the daily deal space, innovators like Groupon and Living Social gained traction in 2009. Imitators quickly bid for share in 2010. As for 2011, well… let’s just say there are a lot of daily deal companies.

December 30, 2010 at 12:12pm

The Hiring Mistake That Could Bring Down Your Startup

Human capital is an amazing resource, one that drives outcomes for companies across life-cycle stages. In the startup world, where most companies fail, founders should fight tooth and nail for a team that will outperform their competitors.

Some entrepreneurs seem to confuse warm seats with progress after closing institutional capital. This is one (of many) lessons that I didn’t think I needed to learn but did anyway. Finding, closing and motivating the right employees will be more important and difficult than closing your investment.

10x people exist

“I have no trouble imagining that one person could be 100 times as productive as another” Paul Graham

Outstanding people can produce amazing amounts of impactful work. They’re generally self motivated, self-improving and behave like owners. They don’t complain about picking up trash off the floor and don’t watch the clock at 6:30. When given the appropriate context and resources, these people can outperform the average by a significant multiplier. The multiplier isn’t limited to super-transparent functions like programming or sales. You can find 10x designers, copywriters, office managers, etc.

10x outcomes are only created by 10x teams

“Ideas are easy, execution is everything, and in anything worth doing, it takes a team to win” -John Doerr

The description above should read like a job spec for a start-up. Hours are hard, there are no support functions like HR or IT, and execution expectations border on the ridiculous. There’s a lot of room for learning, in fact, for many the startup fire hose will be their best opportunity for professional development. But you don’t have time or resources to train the qualities I mentioned above.

Outstanding teams have a multiplier impact, particularly at early stages. These teams will get good product out to market sooner, iterate faster, power through storms and attract more great people. These teams are more likely to hit the bimodal outcome that doesn’t involve lighting stock certificates on fire.

The best people won’t find you

 “Of all the things startups need to do, finding exceptionally talented people that are a good ‘fit’ is likely the hardest”Dharmesh Shah

Great people are undervalued, but it’s not like their work goes without recognition. Employers love them and will fight for them (albeit not hard enough) if they threaten to leave. Former colleagues poach them for new endeavors. Job boards are like dating sites; they attract an audience that doesn’t have other good options.

My company generally reaches out to over 100 people for every open tech position. We look to platforms like LinkedIn Pro to scale our outreach and target companies, specialties and schools where think we’ll find top performers. We generally don’t hire people that are unemployed or found us on a job board.

…and closing the right person will be competitive

“50 no’s and a yes… means yes” –James Bond (Family Guy)

If you’ve done your job, you’re at the table with someone who is skeptical about leaving a good opportunity to work long hours in your closet-of-an-office.

Like any sale, success is determined by a combination of hustle and the attractiveness of your underlying product, or in this case the position itself. My company is continuously refining this value proposition. We pay our people more than our competitors (and our CEO).  We make the work environment attractive by valuing impact not face time, giving great people freedom to operate independently, and not taking ourselves too seriously.

We’ve also learned not to be discouraged by a “no”. Over half of our current team either declined my initial invitation or the offer itself.

So invest in hiring right, and cut quickly when you don’t

“Most people have the will to win, few have the will to prepare to win.” – Bob Knight

December 16, 2010 at 3:08pm

If You’re Going After Groupon’s Market, Bring Something Different To The Table

The rumored $6 billion offer Google dangled in front of Groupon grabbed headlines as observers wondered why the search giant would pay such a premium. The proposed acquisition also raised questions about the vigor returning to Silicon Valley’s start-up culture, where an enormous number of “Groupon clones” have hatched in recent months.

Apart from margins that border on the ridiculous, driving people to local stores is what really attracted Google to Groupon. Consumers may buy Groupons online but they redeem them in brick-and-mortar establishments.

Groupon creates traffic for retailers and fills seats at restaurants. The average sales price for a Groupon is around $40, with the consumer getting $80 worth of merchandise, food or services for that price. Of that $40, 47% goes to Groupon (nearly $20) while the merchant is responsible for delivering $80 worth of product for $20. (Groupon pays about $3 to market that deal; you can decide if it is a good one for merchants.)

Groupon is the first major win for this “offline” model. Even as Web retail continues to mature, 94% of all retail commerce still occurs offline. Groupon’s success is built on the tenet that it brings people through the doors.

But what value does a clone bring to the marketplace? It’s just a copy, after all. In fact, Groupon still owns over 80% of the deal market despite hundreds of similar sites doing the same thing.

We know about these trends at Signpost. In New York, where we’re headquartered, retailers tell us they are called five or six times a day by Groupon-like daily deal companies. Marketing to consumers has also become more expensive. LivingSocial, in a continued bid to unseat Groupon, announced 50% revenue sharing (vs. 10% at Groupon) for affiliates who drive traffic to their site.

We have a different thesis on the future of online-to-offline marketing. We believe it’s a deal marketplace where users are encouraged to post the great finds they discover in their neighborhoods while merchants are encouraged to experiment with offers that work on their terms.

On Signpost, merchants can set limits to the number of deals they offer and, more importantly, determine when deals are available. If Tuesdays and Sundays are slow for your restaurant, a Signpost deal might be a good way to bring in new customers to minimize that excess capacity.

The additional utility encourages businesses without a need for thousands of customers to offer better-than-average deals to a limited audience.

Further, we’ve witnessed first hand how members of the Signpost community have become net promoters for merchants. Our members are socially connected, savvy shoppers that love to discover and share deals with their friends. When Signposters see a particularly enticing special, they post it on Signpost. As more foot traffic enters the store, the merchant is rewarded for offering a good deal.

In New York, one of our four key markets, more than 350 deals are posted each week. These deals come from both the community and merchants. The merchants are not limited to a single deal offered on a particular day via email blast. Rather, they control the frequency of the distribution and the times when a given deal is offered. This not only allows us to grow our audience of users, it also caught the eye of Google (we, unlike Groupon, already have the Google name on our website; full disclosure: Google Ventures is an investor in our site along with Spark Capital).

We think there is a huge value in local, but we believe that the future of the industry lies in helping the entire marketplace benefit, not just the company that markets the group discount. Are you offering a product that Groupon doesn’t address, one that is attractive to merchants as well as consumers? If not, you might be too late for the party.

April 1, 2010 at 5:24pm

Why MBAs Fail at Entrepreneurship

5 pitfalls for recent grads starting a company 

I began working on Postabon, a bootstrapped start-up, after I graduated from Harvard Business School last June. My co-founders and I slept on lots of couches, worked from coffee shops, and invested in a minimum viable product. We recently closed a Series A round with Spark Capital.

It’s been an awesome experience. The past eight months changed my view of entrepreneurship, the value of a degree, and a few mistakes that recent grads (myself included) seem make. Here are a few observations from the left-most section of the start-up learning curve. 

Execution - VCs don’t give a shit about your PowerPoint deck 

MBAs tend to prioritize funding over execution. In May of 2009 Postabon was a 30 page presentation full of research and ThinkCell graphics on why local would be the next big thing. No one bought it.

It’s not 2002. Tech trends like cloud computing, coding frameworks and better browsers means most consumer facing start-ups (without inventory) are really cheap to start. With three months and ~$10K, we created a bare-minimum website and iPhone app that allowed us to iterate daily based on consumer feedback. No amount of time in Baker Library would have substituted.

Building a product will allow you to identify a viable strategy, iterate, and prove your team can win. Research, formatting and nicely worded emails are a prerequisite but by no means a differentiator.

Group Think – Figure out what’s popular, then do the opposite

MBAs idealize jobs and ideas that used to offer outstanding returns. Private Equity and Hedge Funds offered outstanding salaries to HBS students from 06-08 and thus attracted “top” HBS students. As more talented students pursued these options it became conventional wisdom that everyone should be doing the same.

It turns out we’re good at picking sectors to avoid. The Harvard MBA Index has rightly predicted shorting the stock market when over 30% of HBS students go into finance. In 2008 the index hit an all-time high of 41%. Students aren’t the only ones showing up late to parties - in June of 2000 HBS initiated an ill-fated Silicon Valley Campus.

Howard Aiken has a great quote: “Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats.” Have the courage to take a path that may not be obvious to your peers.

Team – The person sitting next to you is a bad partner

MBAs are told we’re diverse. We have a great mix of students from lots of countries and previous careers. We tend to discount unrepresented functions like tech and marketing.

A turning point for Postabon was finding engineers who could execute against business objectives. Without them we wouldn’t have a product. They wake up at 2AM when the site goes down, think of things like database replication and recommend books I hadn’t heard of like Getting Real and The Mythical Man Month.

Your best partner is the antithesis of you. As Donald Rumsfeld might say, this person will help you identify your unknown unknowns.

Entitlement – Your $100K diploma won’t make cold calls

Getting an MBA is expensive. We spent months studying for the GMAT, writing essays and preparing for interviews so we could quit well paying jobs and incur $80K in debt. Most MBAs justify the expense with the expectation that it will vault them to a kick-ass well paying career. By the time we begin thinking about the next step, many have a “what will you do for me” attitude.

Compare this with (one of many) factories for your soon-to-be competitors: seed incubators. Incubators generally foster humility [e.g. lots of rice and beans] and a singular focus on execution. Graduating teams often have a prototype, customers and – most importantly – passion for their idea.

Entrepreneurship is the truest form of meritocracy where “credentialing” counts for nothing. Be humble and cognizant of your weaknesses, and put your passion for idea show (as opposed to your $$ aspirations).

Risk Aversion – IBanking won’t pave the way to (tech) entrepreneurship

Assuming a 5 year payback, you’ll need to make $35K a year pre-tax to break even on your student debt. Seed stage start-ups will add to the pain as you inject personal and family money into your business. If you do close on institutional capital, you’ll take a below-market salary that, when added to your debt, will mean a poorer lifestyle than the interns you just hired.

You soon start to think about joining an investment bank for the next 2-3 years so you can continue to learn and save up before you make the leap of faith. There are two problems with this theory: 1) most investment bankers hate their jobs 2) the corporate life is another bubble with similar pitfalls to MBA programs.

The seed experience had frequent “character building” periods that I suspect are more difficult on the tail end of a high paying post-MBA job. More importantly - from my brief experience – no lifestyle improvement would compensate for working on something you’re not passionate about.

The content here obviously isn’t new. Here are few of my favorite blogs that are good sources of inspiration.

Steve Blank

Darmesh Shah

Paul Graham

March 16, 2010 at 8:52pm

South By Southwest (SXSW) on a Budget

This week thousands of visitors will inject $100M into the Austin economy during the South by Southwest (SXSW) conference. Plane tickets, hotels and incidental expenses can quickly add up for entrepreneurs, filmmakers and/or musicians. The Postabon team is always looking for a great deal – here are five tips that may be helpful next year:

1)      Buy Aftermarket Tickets: SXSW encourages visitors to buy tickets early with a graduated pricing schedule. Some of these tickets flood the aftermarket in the weeks before the event as would-be attendees run into conflicts. This year Interactive and Platinum tickets sold for $350 and $700 respectively (compared to $550 and $1,225).

2)      Priceline Your Hotel: Check out betterbidding or BiddingForTravel for recommendations from guru’s who manipulate Priceline and Hotwire’s pricing interface. This year users found rooms for $50/night at the downtown Holiday Inn less than a week before the event. Also check out AirBNB for ~170 couches starting at $25/night.

3)      Fly to San Antonio: San Antonio is around 75 minutes away and accessible by bus or train. I didn’t do this but wish I had; expect to find flights from NYC for as little as $200 and avoid a 90 minute security line at the Austin airport.

4)      Rent a Bike: SXSW panels can be 20 minutes apart.  Renting a bike is a cheap way to get around that’s also safe(r) for after parties. Bicycle Sports Shop rents bikes for $22/day. This year I drove a moped that was even more fun than it looks ;D

5)      Get Swag: Sponsors dole out lots of swag at SXSW in hopes of gaining attention/traction with early adopters. Check out great deals on sites like Postabon to navigate your way through open bars. Also consider attending events sponsored by one of the few companies that are actually making money. This year Groupon gave away free iPhone chargers at their recovery breakfast.