Spin only making Yahoo's bad new policy worse

Yahoo's latest move to try to shake itself out of the doldrums is an edict that bans telecommuting.  The new policy and the memo that dictates it to employees are both pretty bad.

The memo says, "Speed and quality are often sacrificed when we work from home."  The solution is not working smarter, harder, more efficiently or with better use of technology, but rather just being "physically together."  No data is provided as to how being "present in our offices" will solve anything.  No explanation of the pros and cons of telecommuting is given.  The memo is a superficial collection of flowery phrases offered up in the hope that they will be accepted as fact.

What's really needed in these situations is policy that recognizes the modern way in which global technology work gets done and finds the right balance among a wide variety of activities.  Technology company leaders should want to encourage people to put in the hours necessary to do great work, wherever they might be.  In-office or out-of-office is a secondary outcome.  In-office work can help in collaboration, team building and communication-related activities.  Out-of-office work, away from meetings and other office attractions (food, ping pong and friends), can facilitate efficient consideration of product strategy, long term planning and development of...well, better core human resources policies.

But where the "no working from home" policy goes from bad to just plain weird is some of the spin that has accompanied it.  One recent report provided extensive justifications on the new policy from someone close to the issue, presumably an insider.   This source suggests that the policy came about because some employees were poor performers and "not productive."  These people will theoretically quit rather than comply with the new policy, which would be a good thing for the organization.  So, the source suggests, CEO Marissa Mayer sees this as "a layoff that's not a layoff."

For this, the source suggests that Mayer "turned out to have a lot of courage.  She's dealing with problems no one wanted to deal with before."

This makes no sense.  Yahoo seems to be having a problem with productivity and with management.  If some remote employees are not productive and yet it takes a complete ban on remote work as the solution, then it's clear that those employees and their managers were poor performers.  What's more, there is nothing courageous about using a broad and rigid policy to achieve "a layoff that's not a layoff."  It's much more passive-aggressive than courageous.  And more passive-aggressive leadership is the last thing corporate America needs.

Why the TechForward victory over Best Buy is so glorious

In some respects, Best Buy's theft of trade secrets from startup TechForward is a fairly routine matter.  Small company pitches idea to large company.  Large company signs an NDA.  But large company likes the idea so much that it basically makes the idea (and the methodology behind it) its own.

The context around the resulting litigation, however, described in a blog post by a venture capitalist whose firm funded TechForward, is fascinating.  For me, it's also uplifting.  "Send your business plans to these guys" inspiring, in fact.  And not merely because TechForward won the lawsuit.

First and foremost, the venture firm, First Round Capital, really understands the importance of the little guy in the technology world.  In deciding to fund a lawsuit against Best Buy, where many would have just moved on, First Round was speaking with actions, not just words, about sticking up for the entrepreneur.  First Round partner Josh Kopelman wrote, "If big companies believe they can violate agreements with immunity because a startup can't afford to sue them, it is bad news for every startup in the ecosystem."

There are a couple other great learnings from this story.  NDAs, those throwaway documents so many business people sign without reading or don't bother to sign at all, can really become a critical agreement that governs the course of a relationship - always make sure you get them reviewed by counsel and signed.  Finally, the litigators that some business people like to point to as "the problem" were, in this case, the solution - while the Best Buy business people were crass and manipulative, the TechForward lawyers saw that justice was done.

Congratulations to the teams at TechForward and First Round Capital.  And thank you, from all of us who work with emerging technology companies.

Finally, mainstream media provides a balanced piece on copyright

My experience is that the mainstream media struggles to explain legal issues.  Often, in trying to simplify complex concepts, the meat gets trimmed beyond recognition.  Other times the piece becomes an editorial, riding some populist wave that uses a famous case merely as a backdrop.

A recent article in Fortune magazine, however, hits the mark, providing a balanced perspective on the evolution of file sharing services, the related copyright law and what it all means.

My favorite part is actually a sidebar that clearly illustrates that the latest iteration of file sharing, the so-called cyberlockers, is not without victims.  The common argument in favor of file sharing is that the artists will keep producing artistic works, but will find other ways to make money.  The sidebar illustrates that this isn't always true.  An independent filmmaker named Ellen Seidler went into debt to make a movie, only to see it pirated in over 56,000 locations.  Seidler said she "probably won't" make another movie in the wake of that experience.

Some may say that there is no real need to pay for music, for example, when bands make so much money from playing live.  But people became fans of those bands that can fill big stadiums through conventional methods of music distribution.  They paid money for CDs or MP3s, encouraging the bands to make more music, then tour.

Enjoy the articles.  Then go buy a DVD of your favorite movie out of gratitude that the file sharing phenomenon didn't prevent the movie from being made.

Fenwick's valuable Venture Capital Survey celebrates 10 years

"What is market?"


"What is the trend?"



These two questions are heard frequently in Silicon Valley, but there is too often a dearth of local, original data to answer either one.  For 10 years now, Silicon Valley technology law firm Fenwick & West has been addressing this need in the area of venture financings.


A hands-on team at the firm publishes an in-depth quarterly analysis known as the Venture Capital Survey.  The latest "anniversary edition" was released a few weeks ago for the fourth quarter of 2011 and is available on Fenwick's web-site here.


I read this report every quarter for a few reasons.  First, the amount of data analyzed by the survey is remarkable.  In the most recent survey, 117 companies that reported raising money in the fourth quarter of 2011 were analyzed.  The financings are examined not just for valuation but for some of the key provisions that were used, such as liquidation preferences and anti-dilution features.


Second, the results have a strong local flavor.  The analysis covers Silicon Valley-headquartered companies, giving it a much more relevant feel for our ecosystem than national statistics.


Third, the work is unique and original.  Much of the research on financing terms involves manual labor.  About 10 Fenwick professionals are involved in putting the report together every quarter.


Finally, the authors draw many interesting conclusions that help put the mountains of data into useful context about trends.  In the latest edition, the authors state that some industries, such as Internet/digital media and software, are concerned about a bubble, while others, such as cleantech and life science, are having a tougher time.  Against this backdrop, the detailed tables reveal that in the fourth quarter 80% of the software industry financings were up rounds, but only 29% of the cleantech transactions were up rounds.


To join me in subscribing to Fenwick's Venture Capital Survey, click here.

When both the coffee and the fancy lobby become an afterthought

Last year I spoke at a GigaOM conference.  I was a panelist on one of my favorite topics, engaging independent contractors using legally compliant models.  But, while at the conference, another panel about co-working caught my ear.

One of the speakers was Don Ball, co-founder of a successful co-working space in Minnesota.  Co-working spaces are shared workspaces where freelancers or even small startups can get a wifi connection, a few desks (typically in a open, collaborative floor plan) and minor administrative services in a reasonable, flexible fee arrangement.  It is often thought of as the evolution of the typical corner coffee shop, with a bit more interaction among the customers.  In other words, a co-working space is the place to go when your day is less about the coffee and more about productivity.

Ball and others in this particular panel were making the point that larger companies will increasingly take advantage of the co-working trend.  Even Fortune 500 companies can find ways to utilize co-working concepts.  After all, the core idea is that a technology-enabled contributor does not need to physically be in any one specific location to be productive.  So, by essentially setting their employees free to “roam,” the large corporation can save millions by reducing its significant real estate footprint while potentially reaping other benefits, such as happier employees and a more geographically distributed sales force.

Already, it’s predicted that more than 50% of the private workforce will be independent by the year 2020.  These will be people utilizing new places to work.  Imagine adding to that mix larger corporations that want to reap similar benefits.

It is entirely possible that we are witnessing the beginning of the end of the fancy corporate office space.

How to actually get to win-win

Many companies and business development executives talk about the importance of a “win-win” philosophy in their relationships and negotiations.  They want to be successful and their partners to be successful in a true synergy.  But, what is their road map for getting to a win-win?  Too often, there isn’t a real methodology behind the talk.  Win-win is in danger before the race even starts.

Here’s an approach that can be applied to many different types of business arrangements to try to achieve that holy grail of win-win.  It has worked for me over many years of negotiating hundreds of deals.

1.  Spend extra time on the economics up front.  Since win-win is supposed to mean that each company makes more money with the partner than it would without, what modeling has been done to ensure that this becomes reality?  In practice, it is tempting to jump into papering a transaction before serious financial analysis has truly run its course.  Yet, a dedication to getting the numbers right will typically pay dividends.

2.  Respect, rather than take advantage of, your partner’s largest concerns.  This is harder than it sounds.  Every negotiation will involve a certain amount of chess and horse-trading.  But, if your partner reveals a walk away position or two that will be standard in its industry, respecting that position will instantly deepen the relationship.

3.  When it comes to the legalese, be prepared to settle on true neutrality.  The typical contract will favor the side of a deal that prepared it.  There isn’t necessarily anything wrong with that, as long as both sides understand what true neutrality means and, assuming the leverage is roughly equal, are willing to settle on it.  It means reciprocal representations, indemnifications and confidentiality provisions.  When two companies are located in different states, it often means choosing a third state’s law to govern the contract.

4.  Understand the details.  Is the devil really in the details?  Since execution is about details, the answer is almost always yes.  Sure, contracts get amended all the time, but the wrong starting point could kill the relationship before it has time to blossom.  Lawyers should understand the business purpose and the business people should understand the legalese.  Everyone needs to read the contract.

5.  Strive for a long-term contract.  As much as corporate America talks about long-term thinking and strategy, there are many forces that make this challenging.  Quarterly earnings calls for public companies emphasize 90 days of performance.  Revenue recognition rules can essentially encourage short-term deals.  It’s difficult to establish win-win in a short time frame.  Aim for a five-year term.  Expect, plan for and demand success.  Commitment facilitates win-win.

Ownership is (still) everything

With open source software being widely popular and Larry Lessig becoming a household name, is the concept of intellectual property ownership dead?


Absolutely not.


Inventors are still applying for patents as aggressively as ever.  Ownership comes up in almost every commercial sales contract, in every M&A transaction and in every IPO.  Today we even have companies claiming ownership in LinkedIn contacts.


This is all because ownership remains a great differentiator.  Generally, ownership entitles you not just to engage in some kind of lucrative activity.  It also allows you to prevent others from doing it.  Companies sue others for patent infringement or negotiate for ownership of software in commercial contracts because millions, potentially billions, of dollars are at stake.


How should companies react to this reality?


Embrace it.  Recognize this value and work to maximize it.  Invent, develop and patent using the best engineering talent you can find.  Once you have intellectual property, protect, nurture and grow it.  Negotiate hard when the topic of intellectual property comes up, because revenue and enterprise value are up for grabs.  


By acknowledging that ownership of intellectual property remains a foundational issue in company valuations, companies set the philosophical groundwork for business practices that will help them win.