Divisional ascendancy applied to Facebook – how to disrupt the social network

Divisional ascendancy is the official term (more polished) for “divide and conquer”. In politics, sociology and economics, this term applies to breaking up larger concentrations of power into little pieces and tackling them individually.

When a startup is trying to “disrupt” a large market or has a big competitor, the best approach is to break up that larger company’s products, strategy, marketing muscle or sales approach down into its component parts.

Then you want to either:

a) pick on the part that the larger company is the weakest at or

b) pick the part that the larger company is ignoring or

c) pick the part that has the most margins (profit) or

d) pick the part that the larger company thinks is “safe” from threats.

Of course, it goes without saying that if you do this only in the context of the competition (the larger company) and not your customers (or the market in general) – you will fail.

Most larger companies are really a bunch of smaller organizations. That’s the first observation. Very rarely is the culture of larger companies so strong, coherent and consistent that it permeates everything they do and every organization that exists – which is why you see most of the “old guard” in technology unable to innovate, dominate and tackle new markets.

As an example, take a company with multiple products, and multiple channels.

While channel conflict is obvious -when the “partner” team wants to get business to the channel vs. the direct sales team wants to take that business for themselves, product conflict is less so.

Product conflict is when the company plays both the coach (platform) and the player (application) roles.

Take the example of Facebook – they’d like to be a platform, so the developer evangelism team goes out to recruit partners to build apps. Some of those apps become so big and large that they can become bigger than the company itself. When the platform teams notice that, they understand they are “leaving money on the table” for others to monetize.

Strategic or otherwise, they will end up building the app to compete with the partners.

This is a crucial point, that startups can exploit.

Sometimes (when the culture of the company is fairly weak) the two sides (platform and apps) tend to disagree and if there is no strong alignment, or clear answer if it is better to be either, then things go on for a while without clarity from the company. Which allows startups to pick up mindshare and hopefully market share.

In a particular observation about Facebook, I notice how on my mobile it has become an “Instagram” – very heavy on pictures / photo / video heavy and very text / links light.

They are ignoring text in favor of images is my guess, which makes sense for them. If you were to build a pure text, link sharing app for mobile among “friends”, which they are ignoring, I suspect you can disrupt their mojo.

The channel conflict happens more often. In many cases the Business Development team ends up helping partners to sell and fulfill on their “platform”. Left unchecked, they might end up undermining the direct sales team from winning deals directly.

This is quite possibly the best way to disrupt a large B2B company.

Historically, divisionally ascendancy has been the downfall of a few larger software companies – more companies die because of either losing focus on their customer or changing technology under pining or market demand.

The way startups can use this is to convert the battle against a larger company into smaller pieces.

The thing I have noticed, in B2B software companies among the ones I have seen, is that the easiest is to pick the areas the companies are weakest at (which makes sense) and hardest to pick are the areas where the larger company makes the most margin – hence has the most incentive to protect.

The most counterintuitive thing I have noticed is that where companies make the most margin is also where they tend to be the weakest.

The way it works is that your product is so disruptive that they will do anything to protect that margin, including giving away a part of their product free for a certain period – to prevent you from gaining any market share.

So, pick the one they are ignoring and then work your way from there. To do this, you will need to figure out a way to monetize the “ignored” part – where in lies the challenge.

Agree? Or Disagree? The best predictor of future achievement is past achievement.

I mentor 2-3 high school students each year who want to get into a great college and want to understand how to navigate the complexity of admissions, test preparation, extra curricular activities and high school academics.

As part of this process, I end up learning two important areas that I really need to know about, selfishly because I have 4 kids.

First, I end up learning about the selection process at the top schools. What it takes, who is involved, how they make their decisions and what they value. Which helps tremendously in picking companies to back as an investor.

Second, knowing more about the common admission test for the US – the SAT. It is no surprise to many that know me, that I like to take the test and keep myself updated.

The important element of the first I have learned about the first, is that the “selection” committee’s that ends up picking the right students for any school is pretty diverse, but driven by a common goal –

How do we get the “best” students to our college?

As you can imagine, the word best in this question is the most controversial, subjective and arbitrary in this question.

From what I have known, read and heard, the one thing that the committee for admissions feels the responsibility for is charting the course of thousands of young kids worldwide.

On average 25K – 40K students apply to each of the top colleges each year to the top 25 schools and roughly an average of 7%-10% get selected in each college.

While you can claim that the top colleges are fairly diverse in their focus, what they look for and the students they want to attract, they are fairly similar in their desire to attract the “best” for themselves.

What strikes me the most about the process of selection is the criteria that goes into the best.

Lets say you are a committee member at a top US school.

You get an average of 25K applications.

The students who apply, submit their a) high school grade reports b) SAT scores c) personal essays d) recommendation letters and e) accomplishments outside their school – extra curricular activities. You only have these 5 criteria to judge whether they will be “great”.

Now, you have to quickly segment these 25K applicants into 3 categories.

1. Exceptional – the “best” based on the 5 criteria listed above.

2. Passable – the applicants who can be easily passed based on the 5 criteria listed above.

3. Maybe – these are the toughest, because, they have shown some promise, but are not in the “exceptional” category yet.

What is exceptional?

You can see these applicants are going to be great. How? Based on the 5 criteria of course. They have taken harder courses than others, they have better test scores, have excellent recommendation letters and essays and finally have done one thing very well.

They are likely to succeed, regardless of where they get in or what they do. What I am learning is that < 0.5% of applicants fit into this bucket at every school – so in our 25K applicant pool, that’s about 100 applicants or less.

What is passable? You can see these applicants are going to coast. How? Again, based on the 5 criteria, they took easier courses, have average test scores, good recommendations and an ok essay but have been a Jack of all trades, master of none.

These folks are not likely to fail, but they are going to be average. Which is the opposite of great, which is not a bad place to be, but again, every school is looking for people who are going to be “great” and help the school shine. What I am learning is that > 75% of applicants fall into this segment – so about 19K applicants.

The “Maybe” is not that obvious. They have done well in 3 or 4 of the 5 criteria. They may be great, but you can’t say for sure. This applicant pool has tried, maybe succeed in some, maybe failed in some of their attempts, but are some sign of progress.

They could be exceptional, if they are given the right opportunity, but it is not clear. The remainder of the applicant pool or about 6000+ fall into this segment.

The problem is the school can only accept a third of them.

This is the problem that faces every investor as well.

Over 90% of requests for funding I get are “un-investable” by return, investment focus, stage or market.

9.5% are “maybe”.

0.5% are a “yes” to a second meeting, not an immediate investment.

The biggest problem is that the ONLY way to determine “If” someone is going to be successful is based on their past achievements – Just like in the school selection criteria.

This puts many “late bloomers” and “hidden talent” at a distinct disadvantage.

Which is one of the most interesting and challenging parts of the role.

So, why do investors focus so much on the past history of the entrepreneur, their background and “pedigree”?

That’s because they did not have anything else to go by.

Now, that’s changing.

What else can you use as “criteria” or should you take the same criteria and “weigh” them somewhat differently?

The criteria we can use for new startups is a) Entrepreneur and team background b) Market c) Traction and Momentum d) Uniqueness and e) Defensible position.

Until recently, the #1 criteria was always the “Entrepreneur and the team” – which you will still hear from most investors.

Sequoia Capital, though, arguably one of the best investors has gone against the grain and says Market.

The seed stage investors have started to go against the grain and say the #1 criteria is “Traction and Momentum”.

Which is great, but comes with its own set of challenges.

That’s the BIG change that’s happening in the ecosystem.

More people are re-ordering the criteria, weighing the differently and also changing what’s within those criteria.

The thing that’s not changing is that they can only predict the future on anything but past success.

Which is why entrepreneur from “great” colleges, “exceptional” companies and “rock star” backgrounds have an unfavorable advantage.

You can change that with “great” traction”, “exceptional” momentum and “rock star” velocity of your business.

Or continue to do what you are doing and bootstrap yourself and build it on your own terms.

I learned something new yesterday – How to measure Technical Debt?

Yesterday I had a chance to meet an entrepreneur, Brian York. He is the non-technical founder of Bliss.ai, a startup that measures software quality.

More specifically it measures Technical Debt.

I had heard the term before and knew what it meant in theory, and tried to understand it in practice as well, but it always fell in the “nice to know” not a must know bucket.

After meeting with Brian, I don’t think I have changed my mind, but at least I know how to measure it now.

In simple terms, technical debt is when you have to code fast and quick to deliver some capability and you take a few shortcuts – for e.g. you don’t document, you end up writing the same functions again, as opposed to searching for it and calling a library function, don’t ahere to coding standards, etc.

These shortcuts add up over time and ultimately you have to set aside time to “clean up” or pay down the debt.

Like financial debt, not all debt is 100% bad. Sometimes to deliver the functionality (features) on time, you have to ship fast and it ends up being “quick and dirty”.

Which comes back to bite you later – either by crashing, not scaling or just not working at all.

The problem is when it gets out of control and you have to pay “interest” by taking time to re-architect, re-platform or build new from scratch again in a few weeks / months or years.

What I did hear from 2 other engineers who I talked to yesterday was it is interesting but not all that important to track. It is but one measure or “metric” to measure developer effectiveness.

Bliss though, has many paying customers, who give them $60 / month, on average to track their software. They integrate with GitHub, BitBucket, etc. which are code repositories and tell you how well your teams and developers are doing based on running your code through well known static assessment frameworks.

The time you take out of the schedule to pay down technical debts, typically doesn’t result in anything the customers or users will see. This can sometimes be hard to justify.

Here is a framework to think about it from AEquilibrium.

Technical Debt Explanation by AEquilibrium
Technical Debt Explanation by AEquilibrium

Technical debt is the invisible parts of your code that adds negative value to your system.

How do you measure it? And why is it somewhat important?

Measurement is done largely by using static analyzers right now, as I mentioned, and you can quickly get a sense for which developers are doing commits, how many lines of code were checked in and “how much debt was incurred” relative to the lines of code and commits.

The part that’s interesting is the number of companies I know which are doing “hackathons” each quarter (over the weekend) to pare down technical debt.

Which is interesting, but if I were a developer, and I was asked to come and participate at a hackathon to do “work” over a weekend which I was going to do slowly anyway over the week, I am not sure how I’d feel about those extra 30-50 hours per quarter.

Either ways, I thought it was interesting enough to learn about and share – not the debt part, but the measurement part.

Do you measure technical debt in your company yet? And do you track and reward engineers based on that measure?

As measurement and rewards systems get more sophisticated over time, and all our jobs become more outcome based, I can easily see ways to quantify “the 10X developer” myth or the fact.

All measurement is possibly good, but measuring things that are irrelevant creates “metrics debt” in the short term.

My response to the article about my lies and deception

I wanted to take the time to process my response and be objective and thoughtful about my response to allegations about me. Rather than just get angry and immediately have a knee-jerk reaction, which would have been one of counter allegations and finger pointing, I thought I’d take time to go through the cycle of shock, denial, etc. and venting it all, I thought I should reflect first and understand where I went wrong and what I did, which has led to these events.

This is my third version. Hopefully detailed enough to be specific but not too long to sound whiny.

I started my career at a Pretzel Logic – which was in the bay area, which was sold to BEA – no records of the sale exist but in the resumes of a few folks, but the founder (Srikanth Sudararajan now at Helion) is still around to vouch for that.

I went to Cisco as an engineer, in 1995. and left in 1997 with one of my colleagues – Jay Collins (he passed away last year) to start Interfinity. Netscape (Peter McDonald and Steve Savignano were my customers) , Cisco, NetDialog (and a few others were our customers. We operated out of Jay’s garage at first in San Jose and then moved into an office. We hired my cousin as well as an engineer. We built an order fulfillment system. It started as a consulting opportunity, but soon morphed. Jay wanted to leave the area and I wanted the flexibility as well, so we sold it with assets to a friend (the business was doing about $300K – $500K in revenues). I am pretty sure Peter McDonald and Steve, can vouch for that.

Then I did some consulting and started another company called Amura. There’s actually a link to our office address. I started it with a friend, Alok Batra in 1999. We wanted to build eCommerce platforms for online communities. We even got a term sheet from investors – Sevin Rosen funds and a few angels, but I made some critical mistakes during the angel round closing, so I was asked to leave. I sold my shares to the other founders who then built CofIx (with a completely new vision and direction so I have no credit there).

I then went to Asera from 1999 to 2001 which raised a lot of money (over $100 Million from KPCB and others) but was acquired in an asset sale to SEEC in 2001.

During this time I also invested in startups via Zodiac Ventures LLC. Shastri Divakaruni was the General partner, and I invested as a part of the fund. We had other investors including, Anil Nori, now at Microsoft. The fund invested in 20+ companies – none of them super hits. So largely a wash. Anil can confirm that we were both disappointed with our ability to be angel investors. Here is a link to the company (He can confirm that I invested as a part of the fund, obviously).

As a side note, without hopefully sounding snarky – Intel has invested in 1400 companies and when I asked one of their VP’s yesterday, only 500+ of them were public with “records on the Internet”.  So, if somehow “records not on the Internet” is a benchmark for “does not exist” then many entities – including my kids who were born after 2001 – dont exist.

Then I was at Mercury Interactive (acquired by HP) for 4.5 years.

I then started a blog (Vangal) and was consulting with Canvas Group (this was an entity for my consulting engagements) for some time after this.

Then I joined Kannan Ayyar at Karna Global – this was a restart because they were growing before me, but got consumed by the 2001 crash. Kannan and I rebuilt the business slowly. I was at that time the EVP of Sales / Solutions, and Kannan was the CEO. He truly treated me as a co-founder and I was on the board as well. We were the two “executives” and were trying our best to get a sale done, but things did not pan out.

We were close to a sale of the company to EMC / Documentum but they pulled out at the last minute. So Karna’s India portion of the business was sold to Cranes software – hey look there’s a press release as well.

I then returned to India in 2008. Started Buzzgain and sold it to Meltwater. We had a contract with Sakhatech about the payments and I paid them for that contract and effort. I still have not been paid a 100% of what I am owed by Meltwater, which is another story altogether.

In 2012 after the sale, I worked with Sarath Naru and Vishesh Rajaram of Venture East to talk about eOVL (eYantra Online Ventures Limited) which was to be a spin off from eYantra (which Phani N Raj was the CEO of) and was funded by Venture East and Argonaut ventures.

Here are some screen shots of our Shareholder agreement. Indus Law was my legal counsel and Srinivas Katta can confirm that Vish from Venture East was the primary negotiator on this agreement.

EoVL pic 1

Here are the partial agreement pages.

eYantra Mukund Venture East and Argonaut pic 1

And the Shareholders agreement as well.

eYantra Mukund Venture East and Argonaut pic 2

I can clarify that EOVL is Jivity (the new name), which was a spinoff, and these screen shots capture the investors.

I have already spoken about my experiences with Jivity and eYantra. We were unable to secure the next round of funding, so I left.

The part about enGrave, is the one I regret the most. There are no excuses on this one. I truly, deeply and from the bottom of my heart apologize to Nimish. I treated him badly as a founder and should have been more empathetic. At that time I was under a lot of stress as I mentioned before.

After that I started many “projects”.


What I learned was in India, the pain of starting a company, the entities, the MCA filings etc, was arduous.

So I had one company – Vangal Software and services and a whole host of projects to see what sticks.

Social Hues, gitGrow, Kinetic Brains, FreshMonth, HeyMaya, Vangal, Pricearoo, and I am surely forgetting many more. There is a series of posts I can write about all my failures at these projects. I will at some point.

I am comfortable with side projects and ideas to find out and learn what works.

I do have a big fault – so might call me a hypocrite for this – but I dont practice what I preach.

I preach – perseverance, discipline and focus.

I am the most “shiny object” person there is. Folks who know me can testify that. I move from project to project in search of “traction”. 

I am working on fixing that as well.

Just before joining Microsoft, Paul Singh and Dave McClure visited India. I hosted them at home. On a car ride from Paul’s hotel to NPC Product Conclave, he mentioned to me that they were (500 startups) were starting a fund in India. He wanted me to invest a little money so they can say they have investors. I agreed immediately and did write about it when they announced it. My (very poorly thought through) intention was to give them social proof – hey I was investing, you can too – other investors.

Then a few months passed. Paul left 500. I joined Microsoft. I could not invest due to my conflict there. I mentioned that to Pankaj. They ended up not raising that fund. I am positive Paul can confirm that as well.

During my time at Microsoft Ventures as I clarified before, I was specifically asked by founders to confirm that I was an investor for social proof. I am not lying about this at all. It is rather unfortunate that some of them either have forgotten or claim otherwise.

Here’s the thing about AngelList. It is two sided. Unless both parties confirm their “relationship” it does not show up.

So, if I wanted to claim I funded Uber, the owner of Uber has to either initiate this or I have to. Until they confirm (or I do if they initiated), it wont show up.

I cannot confirm if PlusTxt asked, but I know for a fact that a few did. I confirmed. That was my mistake. I had no intention to actually tell people that I invested in them.

Here is another thing – I have over 12,000 connections on LinkedIn and 10,000 “Friends” on Facebook. Are they all my friends? Absolutely not.

My mistake was also to treat Angel List the same way. I dont take any of these online sites too seriously. That is now, I realize a huge mistake. I even confirmed a friends dog as my dog and on Facebook I was a Chef at some restaurant at Facebook – well, all that’s undergoing cleaning now.

As is my “friends” list on all these properties. I realize that’s the way people operate mostly. I was an exception and I did not realize the impact of Angel List, or other platforms and the true intent of social signals.

Finally Napkin Stage – I have consistently talked to Sunil from Sign Easy about my work as a board member not just an advisor. I cannot detail our agreement, but due to a mistake on my part – an oversight, it is an advisory agreement.

Chargebee and Krish have had an advisory relationship for years.

Regarding Appointy – I was disappointed here as well. There is complete email thread on my ownership %, my agreement and details, and the contours of it, but things did not pan out.

I should have waited to sign the paperwork before I put his name on napkin stage. That was my first mistake.

My second mistake was calling them “investments” as opposed to advisory relationships, which is what they were. I think this was a mistake and I should have been more clear up front.

So what’s the bottom line?

  1. I don’t have any intention to lie or deceive anyone. I may have exaggerated on several occasions – I am truly sorry for that. I will rectify that ASAP. I don’t expect anyone to believe it, so I have to prove it with actions. I don’t intend harm, but thats probably debatable if you don’t know me.
  2. Did I make mistakes? I absolutely did. Many of them.
  3. Did I behave badly with Nimish and Anand Lunia? Yes. Could I have acted in a much more mature fashion – absolutely. Could I have handled it better?  Sure.

So what have I been doing?

  1. This episode has helped me figure out who my “friends”, are and who was being nice to my face but have now been saying “I knew it all along”. I also know now, who are waiting for me to fall, but really are disguised as  friends.
  2. I apologized (I dont ever expect to be forgiven) to a few people for hurting them. I am truly sorry again for the pain, heartache an suffering I caused them and their family. It is unconscionable.
  3. I am changing how I interact with people – a lot more cautious, more measured. That’s a good thing.
  4. I am on a 30 days to 1 year plan – be as accurate as possible about my past and present self. No exaggerations, no false claims, etc.
  5. I have been reflecting – why I do what I do. What changes do I expect from that reflection? Hoping to be a better person – who helps a lot, who keeps cheering entrepreneurs and keeps on speaking about my experiences.

Thanks. If you read it so far, you are a friend.

Are there unanswered question still – possibly, but I am tired so I am putting a rest to this.

I fully expect more questions, they never end – but I am not going to answer them any more. I am hoping this gives you enough of a gist of me and you can make up your mind based on our interactions not on published pieces.

Is the opposite of winning and success, learning and not losing or failure?

I was reminded of this yesterday when a friend, Rajesh Setty eloquently put it in an email signature to me.

The opposite of winning is learning.

Which should technically mean that the opposite of learning is winning, but that’s not true. You do learn when you win, The mystery of success and the articulation of failure is a big problem overall.

I have found that when you dont know what made you successful, you make new mistakes.

So my question is, f you keep having multiple “failures” and end up learning a lot, how can you incorporate learning into your learning. Meta Cognition is an important field of science I am paying some attention to.

Metacognition refers to higher order thinking which involves active control over the cognitive processes engaged in learning. Activities such as planning how to approach a given learning task, monitoring comprehension, and evaluating progress toward the completion of a task are metacognitive in nature.

Simply put, learning how you learn is an important skill for most people.

Self awareness, (not nirvana or even self realization, in a spiritual sense) or understanding what makes you as an individual tick is important for entrepreneurs.

That’s another skill I seek to understand about entrepreneurs.

How do they learn? Do they know how they learn? This is less about how coach-able they are, but more about how they go about learning things they dont know much about.

When you get started, there are many things you dont know about the market, customers, adoption, sales, etc.

How you go about prioritizing what’s important to learn and how you learn them is critical to what is called “Execution”.

The ability to understand that is driven, I believe by 3 questions:

  1. How do you learn best? – By reading, but observing, by being tutored, by seeking advice, by doing it yourself, etc.
  2. How quickly can you incorporate the learning into your plans and execute them?
  3. How do you monitor and observe what the results were so you can continue to learn?

So, back to the question – Is the opposite of winning – learning?

And not losing? Similarly

Is the opposite of success, learning as well and not failure?

How SaaS entrepreneurs are looking to grow their business #PacificCrestSurvey

The annual Pacific Crest survey of SaaS companies is ready and published. It is an amazing piece of work. Comprehensive, actionable and very insightful, it is a must read for any SaaS entrepreneur. I highly recommend you take the 30 minutes to read it if you are in the business. Even if you are not and are interested in learning about how our personal and work lives will change with the new models of consumption and delivery of software, this is a good read.

A total of 300 companies participated, so this is a good sample size of the estimated 7000+ SaaS companies in the world.

Some highlights that I think you should definitely not miss if you are not going to read it.

  1. If you are in the US and fewer than 50 people or < $4 Million in annual recurring revenue, you are below average – so this report is skewed towards growing companies, not idea or prototype stage.
  2. If your company is growing revenues < 45% annually you are below average as well.
  3. If you expect to grow <36% next year, well, that’s below average
  4. If you are only hiring your own sales people and not using a marketplace such as Salesforce AppExchange or others, then you will grow significantly slower.
  5. If you are < $2.5 M in revenue, 63% of revenues are likely coming from other Very Small Businesses on average.
Pacific Crest SaaS survey channel usage by company size
Pacific Crest SaaS survey channel usage by company size

As your company “matures” in Average Contract Value (ACV) expect to have a mixture of “inside” – telesales and “outside” – field sales. The magic number seems to be $25K/year or $2K per month. Beyond that, it seems you will need a field channel.

More than $1K per year in ACV and “Internet” self-service sales, or friction free sales is rather over – or it drops from almost 50% to < 20%. You can still use the Internet for lead generation, but the viral – try, buy and grow is pretty much only try and use after $10K per month.

3 things I have learned about being a public person with strong perspectives

There are many things you learn if you write and blog often. One is your vocabulary gets better. Second, you tend to think through things quicker and can crystallize thoughts into basic and fundamental arguments and finally, you get used to listening and appreciating counter points for things you don’t assume are up for debate.

The more meaningful observations I have are the following.

  • Attitude determines everything.

If you are going to have a perspective, be prepared to defend it, have it shredded by others with opinions, anecdotes and innuendoes. Even if your facts and data back you up, there’s nothing stopping people with opinions that are different from yours claiming you are wrong and they are right. Take it in your stride.

A colleague told me this – be prepared to disagree but don’t be disagreeable.

  • You are never as good as people say you are and not as bad as they say either.

Most of the people who will interact with you will form opinions on some 2 minutes of interaction, some in a 30 minute meeting, others, via a Facebook link you shared, another person’s single interaction with you once, maybe your comment or lack of that on Twitter, or the headline of a blog post. Some want to look for any fodder to defend their existing opinions (both positive and negative) of you.

A colleague told me this – if you judge a person based on their best interaction with you or their worst interaction, you are immature.

  • If you build your reputation over many years it will take many years and many mistakes to bring it down.

The corollary is if your reputation is built overnight, it soils overnight as well.

One hit wonders or over-night famous in 15 minutes are like a helium ballon, they soar quickly and burst just as fast. However, it takes years of neglect and poor maintenance for a defective part to cause a car to stall. I used to believe that you have to build your reputation over years, and it can be shredded overnight by one single mistake. Not so. Most people (there are many exceptions) are more even keeled than that.

A friend mentioned this to me – a house built of brick and stone, however poorly built, still withstands many years of the storm.

The personal blog of Mukund Mohan


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