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By Gerry Langeler

I was chatting with two of our portfolio CEO’s recently, as they asked for advice in handling some specific situations that either were new to them, or at least wanted to make sure they were in alignment with the Board before acting.  It struck me that my answers centered around three notions I’ve shared many times with other CEO’s, hence the “universal truth” label.  They are:
1. Go for the gold. 
What I mean here is if someone offers you cash, find a way to say “yes.” This is not always as easy as it sounds, because sometimes that gold comes with strings attached.  The goal is to be creative enough to get the strings to not pull you in directions you don’t want to go, or keep you from going in a direction you do want to go.  So, adjusting those strings in the negotiation for the cash is vital.  But remember that the only thing that kills you in business is running out of cash, not the strings attached to the cash.  So, optimize on cash above all else.
Here’s a relevant example from those CEO discussions.  This company had recently done a financing where OVP was the preferred investor.   After the deal closed, a potential investor who had not been selected came back still wanting to invest.  Some more cash could be helpful, but the company didn’t require all the cash this firm needed to invest to own a meaningful percentage of the portfolio company. So, what to do? 
The company worked with this new investor to split the investment between new capital for the firm and money to buy out some old, tired angel investors at a profit. In addition, we even let management take a little of their Common stock off the table, while keeping the vast majority of their holdings as incentive to stick around and help us make this a very big deal.  Normally, we don’t like to do that, but in this case it was all part of “getting to yes” – and going for the gold.
2. Go for the talent.
One of the CEO’s who called was asking about hiring above the current Board-approved headcount budget.  He raised the question because a big player in the industry is undergoing some dramatic upheaval and they have senior executives and individual contributors jumping off the ship.  Our experience says that truly top people are worth many times what a regular good person is.  And the opportunity to grab bunches of top people all at once happens very rarely.  So, if you can hire them, do – independent of whether you have official job openings for them today, or even in the next six months. (and of course, this relates back to truth #1 – have the cash to do this).
In this specific case, one key employee of the firm in duress would be a direct replacement for a very solid contributor at our portfolio company.  But he would be clearly a step up in capability the company would value as it scaled. So, again, what to do? 
My advice was to interview that person and see if he measured up to the resume and unsolicited recommendations we had received.  If so, then we might be faced with a painful decision – but one that we indeed needed to face.  It is always the CEO’s job to put the best team on the field possible.  If that means (using the same analogy) we needed to trade one of our good performers for a star, then that’s our responsibility.  Certainly, if it comes to that, it is also our responsibility to respect the loyal good performer and either find them another challenging assignment in the firm, or treat them very well upon departure.
3. Go for the throat.
It is very rare in business, and especially for a start-up, to have the opportunity to kill a competitor.  I mean really make them go away, permanently.  History says, in this competitive ring if you get one on the ropes, and you let them get to their corner and recover, they may come back and hurt you badly in a later round.
So, one of our portfolio companies is in just such a situation.  They have a competitor that appears to have wobbly knees.  But, to truly knock them out may take a punch that will hurt us in the gross margin line for a while.  What do you do?
By now, you know my answer.  Throw the punch.  Eliminating the competitor will more than likely eliminate some of the price competition in the segment as a whole, as crowded segments always tend to see a race to the bottom on price.  I told the CEO that we’d give him a pass on his gross margin targets for a bit if he used that flexibility to put the competitor on the mat. (and again this relates to truths #1 and #2, have the cash and the talent to throw that punch)
Go for the gold, go for the talent, go for the throat.  Three universal truths indeed!
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