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Clarity

Daniel Freedman

Newport Beach, California

I'm a serial high-tech entrepreneur who has started, financed, grown, and sold companies in the networking and security sectors. Today, I lead and advise high-growth management teams, putting his public company executive management and private company entrepreneurship experience to work. I'm 54, and I live in Newport Beach, California. I hold Bachelors and Masters degrees in Computer Science from the University of Calgary.

Experience

Venture Advisor, iNovia Capital (http://inovia.vc), 2008 - present.

iNovia manages about $1.2 billion in capital across five funds. My role is to work with portfolio companies on strategy, sales, and marketing, and also to review and provide feedback on each investment iNovia makes.

VP Security Products, McAfee, 1996-1997

At McAfee (then the 10th largest PC software company in the world), I held responsibility for expanding the company’s offerings beyond anti-virus, to cover the entire network security and encryption sectors.

Co-Founder, Launchworks, 1999

I co-founded and sat as a board member of Launchworks, Canada’s highly acclaimed keiretsu-style venture investment house. Launchworks made 11 investments prior to the Internet crash of 2000, and had three successful exits after that crash, including IPO’s of Guest-Tek (the largest in-room Internet provider in the world), 180 Connect (6,000 employees, $400m in revenues, the largest installer of satellite television reception equipment, ultimately sold to DirecTV), and the acquisition by Computer Associates of Control-F1.

Co-Founder and CEO, Jasomi Networks, 2001-2005

I co-founded and led Internet telephony equipment provider Jasomi Networks, and grew it into an award- winning multi-million dollar leader in that industry, before it was successfully acquired by Ditech Networks in 2005.

Co-Founder and CEO, FSA Corporation, 1989-1996

I founded and grew the company into a profitable, internationally recognized network security product powerhouse serving Fortune 100 companies. Some of its product lines were acquired from 1994-1996 by Unison Tymlabs (now IBM) and Symark Software (now BeyondTrust), and the entire company was acquired in 1996 by McAfee.

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Start-ups Venture Capital VoIP Distributed Systems Telecommunications Mergers System Administration Venture Financing Security Network Security

Call me to talk about

Growing a High-Tech Startup Business -- Planning, Funding, Executing, Exiting

Serial entrepreneur, former VP of Security Products at McAfee, Co-Founder at VC company "Launchworks", Lead Mentor at Blue Startups, advisor to numerous startups and VC funds.

Answers 25
Reviews 1

Answers

Daniel Freedman answered

I've purchased vested options from 2 past employers. What do I need to know & do in the first few weeks if an acquisition & an IPO happen? Specifics.

One thing you need to know is if the stock your options convert into is registered stock. If so, you can sell it right away. If not, there is a holding period (6 months, I believe).

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Venture Capital

Venture Funding

Stock Market

Daniel Freedman answered

Seed raise on angelist via convertible debt note?

No downside, as long as whatever money you raise gets you to the conclusion of an important business experiment. For example, if the $50k gets you to the point where you can demonstrate a growing revenue stream, then it's probably a good idea. If not, then you should evaluate what financing you need in order to prove traction in the market, then raise that much. Since you already have some paying customers, people will ask questions about the "quality" of that revenue. Will it recur? Is it representative of the customer base you intend to sell into? Are there enough of them and enough revenue in order to prove that your unit economics are good? Sorry that this answer has more questions in it, but that's how it goes.

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angel investing

Fundraising

Daniel Freedman answered

What are top factors you'd want to understand before committing to a PDP?

I'd want to make sure that whatever the outcome I wanted from the partnership, all of the partners wanted it just as much as me. It would be a mistake to enter into a partnership where something was of vital interest to you, but only peripheral interest to the partners.

Beyond that, it's just the usual factors about reputation, quality of work, trust, price, and so on -- factors that would enter into the decision of any important relationship. But being "just as vital to them as it is to us" is at the top of my list.

So, what happens if it isn't just as vital to them as it is to us? Then perhaps it shouldn't be a partnership. Perhaps it should be brought in house. Or perhaps a different partner should be sought. Or perhaps it should be structured differently -- perhaps a joint venture -- so that it can become more important to the partner.

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Start-ups

Product Development

Strategic Partnerships

Daniel Freedman answered

Is a 23,5% share for an early angel-investor, who is not contributing in the future, too much "dead equity" for raising a VC-backed seed round?

If the company looks like an attractive investment, professional investors (i.e.: VC partners) will not let the drag on the cap table stop a deal from being done. Having said that, there are going to be three voices at the table when discussing this issue: yours, your co-founders, and the investor's. A big question is: do your co-founders feel the same way about your contribution as you do, or do they instead feel that "you got too much equity for the contribution you made". Note I'm not speculating about who is right and who is wrong, but if they feel that way, there are many ways they can cram your equity position down.

For example, they could arrange for a new company, newco, to be created and financed, and then to buy out the assets of the old company. All shareholders (including you) in the old company would receive some shares in newco, but it would be a much smaller percentage than any of you currently hold in the old company. But they will have arranged it so that they already hold a percentage of newco before the acquisition, as does the new investor. The result is that they end up with a larger percentage of newco than they used to have, and you end up with a smaller percentage. It turns out to be very hard to show that this kind of transaction is unfair, since newco brings a lot of new financing money to the table. Indeed, the other founders may feel that this is the fairest solution if they don't believe your contribution merited your current equity stake.

But if they feel really great about your contribution so far, the dominating question will be: Does the new investor feel that the ongoing management team is sufficiently compensated, and will they remain sufficiently compensated once future rounds of equity are incorporated into the cap table. If they feel that the answer to this question is "no", they will worry about having to dilute themselves later in order to properly compensate the ongoing management team. This is where the cap table drag concern comes in.

Sorry this is a bit complex, but hopefully I'm explaining it in a way that makes sense. In a nutshell, I'm saying that if your co-founders disagree with your assessment of the value of your contribution, there is a lot they can do to squeeze you out (or down) at the time of the financing. But if they agree with you, and if the company is really compelling, an investor will probably cope with the cap table, maybe by incorporating the future expected necessary dilution right now, by lowering the company's valuation.

Good luck with it. Too many unknowns to be definitive.

Dan

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angel investing

Venture Capital

Seed Capital

Daniel Freedman answered

I have an opportunity to join a top tier consultancy. Would having worked there help me become a product manager later? My background is in biz dev.

There are a few things to think about before joining the top tier consultancy. First, hopefully the consultancy will put you in front of many customers, so that you can notice their similarities and differences, how they work, what drives them, and so on. This can help you when you are a PM. But if you get pigeon-holed into just one customer for many years (which happens all the time), then you won't benefit in the same way.

Second, the consultancy may pay you very well -- so well that you have "golden handcuffs" tying you to the company. This may be the end of you, though it might be pleasant for a while.

Third, of course having the name-brand company on your resume will open some doors, though it will still be up to you to impress when you walk through those doors.

Could you do just as well in a startup? Nobody can answer that for sure. Both paths have their own risks and rewards.

One way to decide is to follow this saying: Think for today with your head. Think for tomorrow with your heart. What this means is that you should follow your heart into the far future, but it is your head that decides what you should be doing in your near future. Heart being what you love. Head being what makes sense. Very often, what makes sense isn't what you love, which is why so many people become dentists or doctors or lawyers, but then wish they hadn't (of course, many do indeed love those professions, but many started in them because it was the "safe" choice). -- Dan

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Product Management

Daniel Freedman answered

You're about to release a web/iphone app. Include key features on landing page to entice more beta users? Or worry about competitors who may copy?

I agree with Mladen -- Simply make the app the best that it could ever possibly be. That way, you leave your competition no opportunity to out-develop you. Now, they can still out market or out price you. But if the app is near-perfect, you at least will have a shot at winning the game.

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Marketing Strategy

Early-stage Startups

Digital Strategy

Daniel Freedman answered

What is the best way to recruit high profile people to speak at a conference?

The easy answer is to give them something that they want. Although this could be money, it could also be access to your audience. Find out what they are interested in achieving with their speaking engagements, and then make that available to them.

Are they a spokesperson for cancer research? Agree to donate a portion of your conference fees to cancer research. You get the idea - find something they are passionate about, and help them.

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Recruiting

Entrepreneurship

Sales

Daniel Freedman answered

How do you make money to survive while you are building a business? What are some quick ways to make money with less time commitment?

If you can, try doing some short-term contract work for people who might one day be customers for your products. Often, people call this kind of work "consulting", though consulting really means being asked for advice, which is just one kind of short-term contract work.

The reason contract work is good for entrepreneurs is that it puts them squarely in front of a lot of customers, where the entrepreneur can notice problems or issues that many of them have in common. From that, the seeds of a product idea might germinate, and the company can begin to grow from these early customers.

The down side is that it of course takes a lot of time to do this kind of work, and your market may be running away to one of your competitors in the mean time. So, are there alternatives? For some people, there are. The most usual being to obtain external investment for your business from family and friends. There are downsides to this too, of course. The main one is that if your business isn't as good as you initially thought, you might disappoint these family and friends, which feels really bad. Plus, you probably learned something during the failure, and perhaps are ready to try again. Good luck getting money from family and friends for another business, if you screwed up the first one.

So its a balancing act. Lose speed but gain experience. Or gain speed but forego early customer interactions. These are not the only two possible outcomes, but they are representative.

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Cash Flow

Entrepreneurship

Daniel Freedman answered

How do I expand my network with people who are MORE influential than I am? I'm looking for tips and tricks to do this online (with LinkedIn, etc)

One thing you can do is simply show up at various networking events that occur in every city. This can be anything from the local accountant's association monthly luncheon to an angel group, or the board of a theater, and so on. By showing up, you'll naturally find that there are interesting questions to be asked, and comments to be made. And from that, the beginnings of your network are born.

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Networking

Business Networking

Daniel Freedman answered

If the goal is to be an entrepreneur, given the digital age we live in, what skills should sales professionals develop?

All successful sales come from the customer realizing that something of great value is being provided. Therefore, to be an entrepreneur, a person should be searching for something that many people will assess as having great value. In other words, look for something you can design once, and sell over and over again to many people. Techniques such as cold calling may be more or less efficient than the "new" techniques such as social media, mobile marketing, and so on. But none of that matters until you have a product/service that resonates with customers. As a salesperson, you are used to being told "Sell what you have." But as an entrepreneur, you need to be much more interested in "Having what sells."

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Sales

Customer Acquisition

Growth Hacking

Daniel Freedman answered

I started a Saas service for colleges in India. In Marketing to whom do I follow-up in college, whether The principal or The correspondent ?

In any business to business sales situation, you need to evaluate who is involved in the decision chain that leads to a purchase. Typically, there are at least three parties involved. These are:

Your Champion, who noticed your product, and decided it would be a great fit for his organization. This is your cheerleader, and your best friend within the organization.

Your Champion's management, who decide whether things that your champion recommends should be acted upon, given the context that the business is operating in. This includes someone who ultimately will request "budget" to pay for your product or service.

The company's financial management team, perhaps the CFO. This is the person who needs to understand the financial impact that your product will have on his organization. Will it cost capital up front but quickly save money in operational costs over time? What is the payback period, and so on.

There may be others involved too, especially if the company is highly regulated (i.e.: regulatory approvals may be needed).

Bottom line: Through your champion, you map out the network of your customer's organization, and work on each person in the chain that is involved in making a decision.

Don't be put off if, as often happens, you find that your champion is highly enthusiastic, but the rest of the organization isn't. You can beat your head against this kind of brick wall for a long time. But please don't. Instead, move on to the next prospect. The job of your marketing efforts should be to ensure that there are enough leads that you can spend most of your time working on people who will ultimately become customers. Note that you can happily disqualify 99% of your leads if you can end up spending most of your time on the other 1%. Qualify quickly, then spend time with qualified prospects, even if they are in the minority.

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Sales Process

SaaS - Enterprise & SMB B2B

Higher Education

Reviews

Daniel gave me some great insights into finding the right path forward. Great to talk to, very patient and understanding.

Akshay Sachdeva Source: Clarity

Member since June 2014