I admit to being a little over the top about the observance of traditions. I try to find mundane events that can evolve into traditions. My kids think I make the routine ceremonial. Getting a haircut is a big deal at my house. We buy our Christmas tree from exactly the same Christmas tree lot every year. There will be warm orange rolls for breakfast and little smokies for half-time on opening day of the football season.

Yesterday was Paul’s one year anniversary at blist. He brought in a pound of fudge to share. He says he’s starting a new tradition at blist. Each year on your anniversary you need to bring in a pound of chocolate times the number of years you’ve been working at blist. A startup has much in common with a family. You learn a lot about each other. I’m learning that Paul is as geeky about tradition as I am.

Paul’s first year at blist has been phenomenal. He’s a major contributor to both the above-the-surface part of the blist application you see and the below-the-surface infrastructure you don’t. He’s an incredibly diverse software engineer, working all over the stack. Paul is a big picture, long term thinker, which we appreciate. Some software engineers are afraid of hardware and systems administration. Not Paul. He’s physically touched virtually every piece of gear we have and he keeps all of our systems humming. Paul’s been instrumental in building the team by keeping the hiring bar high and genuinely doing a great job of identifying people who can make big, meaningful contributions. blist would be no where as far along today if Paul hadn’t left Microsoft to join us.

So thanks for a terrific first year Paul. This is just the beginning.

I do think if Paul succeeds at spreading the pound of chocolate tradition among all employees, we’ll be incorporating yet another new tradition at blist - the weekly Saturday morning 5K to keep in shape.

I still remember September 16, 2003. It was the day MessageRite, my first company, archived its first email message on behalf of its first customer. I remember all 5 of us huddled around my monitor, watching the output of tail -f on our application’s log file. We watched and watched and finally a message came in. It archived successfully. We cheered; high fives all around. Then a few more came and we cheered some more. It was a great day. But I actually don’t even remember if that first email was archived in the morning or afternoon. I only remember the day, not the time of day.

My sense is that many years from now I’ll remember not only the day, but the exact moment when blist went live. January 29, 2008 at 2:38. That’s when we’ll be on the DEMO stage, unveiling blist for the first time. The excitement is building.

Chris Campbell, one of the founders of Wufoo, wrote a great post earlier this week about the importance of deadlines, especially in software engineering. Deadlines are forcing functions to get a team to think about what’s critical and what’s nice to have. Chris does a great job of boiling down how important it is to launch a product with the must-haves and to wait and see on all the other nice-to-haves.

Deadlines have worked in the newspaper and magazine business forever. Chris’ great post reminds me that deadlines work in mergers and acquisitions too.

In the summer of 2004, when I was CEO of my first company MessageRite, we were negotiating to be acquired by FrontBridge Technologies. We received a letter of intent in mid June. The LOI had an expiration date of July 31, 2004. From the moment both companies signed the LOI there was a flurry of activity related to due diligence. Satisfying due diligence requests is time consuming and a major distraction on the business. Around July 28th I received a call from FrontBridge’s CFO saying there was a little problem but they should be able to take care of it quickly and close the transaction.

The problem was with revenue recognition. MessageRite’s business was archiving email as a service, mainly for compliance reasons. Typically we’d archive email for 3-years or more. We charged our customers monthly, based on how much email we captured on their behalf during the month. In that we had an obligation to store that email for 3 years into the future, we couldn’t recognize all of the revenue at the time we invoiced our customer. For example, if a customer’s invoice was $2,000 for the month we could only recognize about half up front and then we’d recognize the other half in even amounts over the remaining 35 months. FrontBridge was a revenue generating, VC backed company. They really wanted all of MessageRite’s cash receipts to be recognized as revenue, but you can’t.

July 31st came and went. Their CFO called. We’re almost there he assured me. Just give us a day or two. August 2nd came. Almost there. August 5th. Almost there. August 7th. Almost there. It was unbelievably stressful. I think the cliche “pins and needles” was coined by someone going through due diligence. Did I mention that my wife was expecting, with a due date of July 31st? We thought it was ironic that the due dates were the same. Finally on the morning of August 8th I called FrontBridge’s CFO and gave him an ultimatum “You’ve got until this kid comes out to get the deal done or it’s off! I’m not bluffing.” And I wasn’t either. The best time to be acquired is when you don’t need to be, and MessageRite was doing great. I gave him my bank routing numbers and told him I’d know the deal was done when my bank calls to alert me of an incoming wire transfer.

Late on the night of August 9th my wife went into labor. We went to the hospital. On the way I called FrontBridge’s CFO and left a message. I told him he’d better hurry up. Things at the hospital started out well and progressed nicely at first. Then they stalled and baby Merritt dug his heels in. Finally mid-morning on August 10th the doctors told us they wanted to perform a C-section. Our baby was 11 days past due and looked like he was pretty hefty. They didn’t want to take any chances. I called my bank and gave them my cell phone number with instructions to call if a wire transfer came in.

We went in to the operating room. My wife was on the table. The doctor was having his mask tied on by a nurse. Then my phone rang. I told my wife I needed to take this call and it would take only 10 seconds. “Hello, this is Kevin” I said. “Mr. Merritt?” the woman asked. “This is the transfer department at Charles Schwab. I’ve been asked to let you know that a large wire transfer was just deposited into your account”. I thanked her and hung up. 15 minutes later Troy Merritt was born, a healthy 10 pounds 8 ounces. August 10, 2004 was a great day in the Merritt home.

Never underestimate the importance of a deadline.

Today’s Wall Street Journal (WSJ) has a great article by Kelly Spors on the top small workplaces of 2007. It reflects yet again how startups can compete with Microsoft, Google and other large companies when recruiting for top talent. The article highlights 15 small companies having great work environments:

1) Alaska Wild Adventures
2) Barclay Water Management
3) Corporate Ink Public Relations
4) Cowden Associates
5) Exactech
6) FRCH Design
7) Gentle Giant Moving Guerra DeBerry Coody
9) Healthwise
10) NRG Systems
11) Phelps County Bank
12) Point B Solutions Group
13) Reflexite
14) Restek
15) Summit Aviation

Congratulations to all of the companies recognized in the article. The one company on the list with which I’m familiar is Point B Solutions Group, which like blist is a Seattle company. The consulting industry is one where many employees are fatigued with burnout and facing difficult career change decisions because traditional consulting practices are tough on family life. Point B innovates by keeping its consultants local so they don’t have to travel and can be home with their families every night. Another innovation is eliminating the concept of vacation time. Employees are paid hourly, with the ability to decide if and when they’ll work. Want to take 3 months off to tour Europe? No problem. Just take the time off. Of course this means people need to take more self-direction in their financial lives so they can afford to go without a paycheck for a few months. That’s the right step people should be taking anyway, in my opinion.

The article is a great read and I highly recommend you all read it. My take-away key points from it were that great small companies:

* Offer employees tremendous autonomy
* Provide deep transparency to employees
* Encourage employees to manage their careers, including finding the right work/life balance
* Allow employees to significantly influence company direction
* Structure themselves to allow employees to share in profits
* Encourage open communication
* Provide an environment that fosters collaboration, teamwork and camaraderie
* Create career growth opportunities for employees

blist didn’t make the list this year, but hopefully we’ll be considered in the future. We think we share a lot of the same traits. As an example, one way we’ve been able to compete with Amazon, Google and Microsoft for software engineers in the Seattle area is by courting engineers who aspire to be entrepreneurs themselves one day. Microsoft, Google and Amazon provide a lot of resources, infrastructure and process that many engineers take for granted, without even recognizing it. Instead of jumping straight from Microsoft to starting your own company, maybe you’d be better prepared by spending a couple of years in a startup along the way. We welcome future entrepreneurs. It’s a win-win for us and the engineer. The engineer typically has exactly the right skill set and temperament for a startup and by sharing the nitty gritty details of how a startup really works, they’re better prepared when they ultimately launch out on their own. This approach works well for other disciplines - marketing and business development - too, not just engineers.

The WSJ article reminds me to emulate what successful companies do and that a key to creating a healthy work environment is one where both the employer and the employee “win” at meeting their goals.

Looking for a great small company to work for? We hope you’ll consider blist.

In the last few weeks we’ve started to come out of our stealth shell. We republished our corporate website with a little more detail of what we’re building. We started blogging, sprinkling in a little of our product vision. We’ve started letting people give us their email address so they can receive alerts and be invited to try the beta version of blist when we’re ready for that.

Over the last few days an interesting thing happened. Some of the key folks at Dabble DB signed up for our alerts and to join our beta. I like Dabble DB. Of all the web-based databases - Trackvia, Quickbase, Zoho Creator, eUnifyDB, Caspio and a few others, Dabble DB has been the most innovative. Clearly we plan to compete with them when we launch, but that’s not the focus of this post. Some of the guys on the blist team asked how we should respond. Should we suppress them from our email list? Should we email their founder and ask him what motivated him to sign up? It provided the impetus for a good philosophical discussion.

I think startups focus way too much on competitors and not nearly enough on customers.

Here’s a real world example from our early days at MessageRite. Email archiving services are comprised of two functional areas:

1) A set of processes that parse email messages and store them in an archive
2) A user interface that allows people to search for and review messages

When we started building the MessageRite service, we figured out how to parse and archive messages. We really had no idea what the user interface should do. Sure we knew that it needed both full-text search and some kind of structured search (for example, “find all email messages from Henry Blodget between April 5, 2001 and June 14, 2001“) but we didn’t know what else it should do. We could have taken one of two paths to solve that problem:

1) We could have done what our competitors do
2) We could have asked customers to tell us what our application should do

We chose the latter, not for any grandiose strategic reason other than I enjoyed talking to customers and was a little intimidated talking to competitors. While competitors want to annihilate you, with customers there is a win-win equation somewhere to be found.

You might think it would have been awkward to conduct sales calls while not having a very feature rich user interface. We turned it into an opportunity. We positioned it as “the fist companies to sign up for our service are going to have great influence over how the application works.” You know what? Prospects loved the idea. Finally a vendor was listening to them. What we learned over the next few months is that all email archiving solutions in the market suffered from the same inadequacy - poor compliance workflow. All of these prospects-turned-customers told us they were suffering real pain in fulfilling the obligations of reviewing emails and satisfying discovery requests. So that’s where we focused and how we differentiated ourselves in the market. Within 6 months we went from zero customers to turning customers away (due to our bandwidth limitations). It was a nice problem to have - much better than having built another me-too product nobody wanted.

By focusing on customers, not competitors, you have a much higher probability of creating a product the market really wants and that’s the key to not only startup success, but professional satisfaction.

During due diligence associated with raising capital for MessageRite, one of the members of the due diligence team remarked that the average time it takes customers to pay their invoices can be terrifying. On average our customers paid their invoices in fewer than 7 days. We had never once had a single customer take more than 23 days to pay their invoice. He asked if we had a bulldog doing A/R, hounding our customers to pay. Nope. Nobody at MessageRite has ever called a customer to remind them to pay their bill. “How are you doing it then?” he asked. I answered the question candidly “I think it’s because our invoices are orange.”

That sounds odd, I know. But our customers were all mid-sized financial services companies with dozens of invoices per month. I can envision the Accounts Payable person having this tattered stack of invoices and seeing one orange one sticking out a like a sore thumb - staring him in the face, day after day. Maybe subconsciously he wanted to pay it just to dispose of it and clean up the pile.  We haven’t even launched our service at blist yet, but I can assure you that our invoices will be orange.