Thoughts in Time

The New York Times had a sophisticated column recently titled “In Private Pay, an Implicit Progressive Tax.” Ultimately, what the article says is that the most productive workers are subsidizing the least productive. These people aren’t lured away to other firms who are willing to pay more because there are other reasons why they may take or stay in a job.

This fits perfectly with the research I did for my Masters Capstone (”Thesis”) at UPenn. It’s also an important lesson for startups who are looking to recruit a rockstar team, and is an important part of the product I’m currently developing for my new startup.

What does someone get from a job? Well, from an economists standpoint, a person trades their time for money. However, this is not all one gets from a job. There are two key ideas from Psychology that could come into play.

1. Manifest Needs - Basically, we all have psychological needs. This could be a need for affiliation, or a need for achievement. Different jobs, company cultures, or even management styles lead to differing levels of psychological needs fulfillment. One way to think of this is how a particular job pays an individual psychologically.

2. Strengths usage - We all have certain strengths. In Psychology, a particular set of strengths called Character Strengths, has been developed that helps us understand what we as individuals are particularly good at. My strengths tend towards learning, creativity, and curiosity. Some of my friends have top strengths of Wisdom, or Social Intelligence. My wife’s top strength is Bravery (hmmm ). Different jobs enable a person to use their strengths less or more. Using strengths in new ways has been shown to lead to increased happiness and decreased depression, and is hypothesized to lead to increased performance (makes sense right?). This is another way that a particular job can compensate an individual.

3. Rewards versus orientation to work. Research has found that individuals tend towards three different orientations towards work. 1) work = way to get $ to do other things 2) work = way to gain power / prestige as you move up in title 3) work = way to see your impact on the world. The interesting thing here is that if there’s a mismatch between someone’s orientation and the way a job rewards them (i.e. cash bonus vs. titular promotion), it can lead to unhappiness on the employee’s part.

What does this mean for a startup? It means that since you’re cash poor, it’s important to maximize fit along these other dimensions. Even though you might plan to offer equity ownership to make up for the difference, if you understand the ideas above, you will be making sure the person you’re hiring is getting paid in other ways. This way you CAN afford the highest quality talent, and will build an A team with A level fit.

I connected with an entrepreneur the other day who is in the midst of fundraising for her company. She’s having a particularly difficult time because her business focused on the Russian market. She was feeling disheartened as she had reached out to a number of people and hadn’t had any strong bites. I shared some info about Higher One’s initial fundraising that hopefully helped inspire her to keep pushing.

When we started Higher One, (which incidentally has just filed it’s S-1), it was March, 2000. The dot-com bubble was bursting and funding was hard to come by. We were focused on finding angel investors. Our first check was for $10,000 from a family member, and we worked hard to scrape our first round together in dribs and drabs. Later, Miles and I would review the folders of potential investors we had talked to. By our count, we had connected to over 200 potential angels! By the time we finished fundraising for Higher One, I would estimate that we had met with over 350 potential funders (now including VC’s, etc). Given that Higher One had less than 40 investors, you can tell our hit rate wasn’t high and the majority of people said no.

Since it’s likely that you’re going to hear NO a lot when fundraising, what are some key ideas that you can keep in mind to give you the best chance of success? I think you’d do well to keep in mind the “Four P’s of fundraising.”

People:Fundamentally, fundraising is a sales process. It’s about portraying the investment opportunity in a way that other individuals will see the same opportunity you will. It’s also about connections. When you meet with a potential investor, if they aren’t interested, ask if they might know other investors who might be. Don’t be shy. You never know which connection is going to lead you to your lead investor. If you have a choice of investors, ask them to be specific about how they could add value.

Positivity: When raising money, you will hear NO. Most likely, if this is your first time, you will hear NO a lot. I’m not saying “think positive and you’ll succeed.” I’m saying that if you don’t come across as believing in your product and market opportunity, how will your investors? Revel in the progress you make. Celebrate milestones, key learnings, etc. Each of this will help you remain positive that someone will say YES, and they will be lucky they did.

Persistance: When an investor says no, usually it is not a “NOT EVER” but rather a “No for now.” Listen to feedback. Ask at what point they would be interested in an investment. Don’t be shy to come back when you reach that point. With Higher One, our first institutional investor had turned us down twice before agreeing to invest. He later told us that he figured that we had come back twice having done what we said we would do. If we continued, he’d do well. This brings us to the last “P”.

Performance This “P” could also be “Progress”. Nothing helps you raise more money than showing progress against milestones. If you first call on an investor and share that you plan to have a beta customer in the next 30 days, and 20 days later you can tell her about your newly signed beta customer, she will be much more inclined to invest. Have a list of milestones (some of these can be key learning milestones) in your pitch. Show progress and keep potential investors updated as you knock these milestones down.

Until now I’ve been writing both personal updates and professional commentary on this blog. I’ve decided to end that practice to help keep my writing more focused and to give the blog a more consistent theme. Kellee and I used www.seanandkellee.com to chronicle our around the world journey. We’re still posting updates from the trip there, and I will use that going forward for personal commentary and updates for friends and family. Thoughts in Time, and www.SeanGlass.com will become the sites that I use to share information around my professional interests. These include entrepreneurship, angel investing and venture capital; financial markets and investing; positive psychology and performance management for startups and established organizations, positive psychology as it relates to investment, and finally positive psychology and government policy. Happy New Year and here’s to a great 2010!

While many of my friends traveled during college or did a semester abroad, I was busy building Higher One with Miles, Mark, Casey,and Dean. So this year I decided that rather than going back to work right away, Kellee and I would take six months to travel around the world. We’ve got an ambitious itinerary and are asking our friends, contacts, and connections for help so that we really see the most interesting things, meet interesting people, and have six months that we’ll remember for a lifetime. In order to “crowd source” our trip, I’ve put up a trip website. You can visit it at www.seanandkellee.com. You can offer suggestions through the trip wiki, follow our progress, see photo’s and keep up with my tweets. It should be a whole lot of fun. I’m going to continue blogging on this site about technology entrepreneurship, investing, and positive psychology, and will blog about the trip on www.seanandkellee.com.

Today is a big day for Kellee and me as we’re closing on a house in Key West, Florida. It is a great time to look to buy, and we believe we got a great deal on a house in the heart of Old Town. Gary Thomas, who is the only key west realtor who consistently blogs (at keywestproperties.blogspot.com) was amazingly helpful in helping us find a perfect property for us and then helping us navigate through the sales process from thousands of miles away. Here’s a pic of us outside the house in early March.

We’re going to be leaving London on April 22nd. We originally were going to stay through May, but decided that we’d rather get to Key West sooner and come back to Europe earlier in the summer to start our around the world trip. We’re having a going away party on April 18th and hope to see many of our friends from London there.

Over the next few months, I’m primarily focusing on finishing my work for my Master in Applied Positive Psychology degree which I should receive in August from the University of Pennsylvania. For my Master’s Capstone Project (like a thesis), I will be focusing on studying the relationship between job performance and job satisfaction with fit between a job and certain dimensions other than skill and experience. If that’s something that interests you, let me know. I’m also working on launching two new organizations.

1) The Positive Policy Institute - I’m working with two fellow UPENN students to create a non-profit think tank that will focus on policy advising and advocacy based on positive psychology research and application. There are many economics based think tanks, we think a psychology based think tank that focuses on helping governments and NGO’s implement policies that are not just based on fixing problems, but also on creating flourishing for their citizens will make a big difference in the world.

2) The Positive Performance Institute (P2 Institute) - I’m working with a friend and former employee of IMG to create a corporate training program that uses the metaphor of sport to teach a curriculum focused on resilience, leadership, and performance. The curriculum is built off of positive psychology research, and we’re going to start by integrating it with a golf program. It will launch in 2010. It will be a 3 day course held at 5 star resorts in the US and UK. Class size will be limited, and I will personally teach the inaugural courses. By integrating sport with the classroom instruction, we will help executives and leaders be able to immediately put what they’re learning to work - making learning more fun and ensuring that what we teach sticks! This company is part of a holding company that I have created to build businesses based on positive psychology and through the application of positive psychology techniques to investing and management. Of course, I’ll still be investing with the guys from Higher One through Top Floor Capital. I hope to write about some of our various portfolio companies soon.

Starting at the end of June, Kellee and I have a massive around the world trip planned. Our itinerary is still coming together, but will roughly be Europe for July and August (including Morocco and Egypt), India, Southeast Asia, China, Japan, New Zealand, Australia, Brazil, Chile, Argentina, Belize, Panama… Home to Key West for Christmas with our families.

It’s going to be a great year, and today is really the start.

There’s a great article in the NY Times about how understanding psychology can lead to policies that have more impact on children, resulting in better educational achievement. The full article is here:
http://www.nytimes.com/2009/02/08/opinion/08nisbett.html?_r=1&em

This is a great example of why the study of human behavior, i.e. Psychology, can have a big impact on successful policy making. This is an area I’m taking more and more of an interest in, and I’m sure will be writing more about.

As someone with an engineering background (I have a B.S. in Electrical Engineering from Yale), I tend towards mathematical and system oriented thinking about problems and opportunities. The final paper I had to write for my introduction to positive psychology class with Martin Seligman at UPenn gave me the opportunity to put together my thoughts on human happiness and well-being. I thought it might be fun to share and see what people thought. I’ve posted the document on scribd. Take a look.

Sean Glass - Happiness / Well Being System

This week, we publicly announced that we were shuttering Pikum. Although very disappointed that a lot of hard work has not panned out, I am someone who always believes that the right thing to do with a setback is to examine it to learn what can be learned, and then to move forward. We cannot change the past, we can only be present in the now, taking positive action to move to our vision of the best possible future. Endings happen all the time. Change is constant, and thus all endings are new beginnings.

I want to thank the scores of people who have written to me directly expressing that they’re sorry that Pikum didn’t work out, and offering support. It has been really touching, and I really appreciate it.

Kellee and I are still determining exactly what we’re going to do. We have come to really love London and our friends here. At the same time, we miss being close to our families and as we consider the next stage of our lives (read - Kids!), we think we may be better of getting back to the U.S.

Our current plan is to remain the UK through May. We’ve always wanted to have a place in the Florida Key’s, so we’re considering buying a place there and moving there initially. Starting in July, we’re planning a trip around the world. The exact itinerary isn’t together yet, but what I’m hoping to do is to meet as many investors, entrepreneurs, policy makers and influencers, and people related to positive psychology as possible. We plan finish the trip in December.

During the next few months, I’m hoping to see many of my UK friends from the Tech community as possible, as well as to meet new entrepreneurs and investors from the UK and europe. I’m also looking forward meeting more of the people involved with positive psychology in the UK. The intersection is something I plan on blogging more about soon.

Mike Butcher of TechCrunch UK asked if I’d be willing to answer some questions about our angel investing. He published our email interview in full. If you’re a seed stage startup with a promising business, get in touch (we’ll be putting up the TopFloorCapital.com web site sometime soon!). The nicest thing about the article was getting this note from one of the CEO’s of an angel investment I’m involved with (I’m in 6 so far):

Hi Sean,

Congratulations on getting profiled on techcrunch. You’ve been one of our most supportive and helpful angels thus far.

Here’s a link to the full article.

From steve…

Totally off topic but if you’re interested in framework comparisons or know of anyone who is then point them to my video presentation I made at the NYPHP.org group in May …

http://www.stephendrobinson.com/talks/