The future of retail is at the intersection of e-commerce and bricks-and-mortars, says co-founder Neil Blumenthal.

When Warby Parker opened a flagship in New York City, many people were shocked. No one expected the digital eyewear disruptor to expand their business to a bricks-and-mortar store.

Speaking at Internet Week this week, Neil Blumenthal, one of Warby Parker’s founders, said the move was strategic.

“We believe the future of retail is at the intersection of e-commerce and bricks-and-mortar,” he said. “People think it’s crazy that we went and signed a 10-year lease in SoHo, next to Ralph Lauren, across the street from the Apple Store. But we have actually been dabbling in bricks-and-mortar for about three years, almost as long as we have had the website open.”

When it launched, the start-up offered customers the option to try a number of glasses at home, he explained.

“That in itself was a physical form of sales, but what happened was that within 48 hours of launch, we were overwhelmed by demand and had to suspend the home trial program. And people would call up and say, ‘Hey, can we come to your office and try on glasses?’ And we would say, ‘Uh, we are working out of my apartment.’

“People would come in, and we would lay out the glasses on the dining room table. And we thought it was going to be a sub-optimal experience, but it ended up being a very special experience in that we could build relationships with our customers. They could try on all the glasses. We started to realize maybe there was a place for traditional bricks-and-mortar retail.”

The idea for the Warby Parker showroom and pop-ups was born. When those raked in profits, the company decided to open a flagship to anchor the brand. Now, thanks to word-of-mouth and foot traffic, it’s become a profit center, driving nearly 50 percent of their sales.

“Our philosophy from the get-go has always been: How can we grow this primarily through word-of-mouth?

“It’s about how can we create special moments. When you walk into the store, most people are really surprised, because it doesn’t look like any place they have ever been that sells eye glasses.”

Source: Start-up

Ready to kiss your start-up goodbye? VC principal Geoff Lewis offers four ways to tell if you’re prime for the picking.

Exit strategies are rarely mentioned by start-ups, yet they are something every business owner needs if they hope to be acquired, said Geoff Lewis, principal at Founders Fund, a venture capital firm.

Speaking Tuesday at Internet Week in New York, he explained, “entrepreneurs and VCs don’t often talk too candidly about how to think about getting acquired, because the best start-ups don’t actually sell. The truth of the matter is that the vast majority of start-ups will not IPO, and most start-ups are also not suicidal. They do not want to die. Start-ups do not want to go off into the night with no exit whatsoever.”

There might not be an incentive to plan, as there’s nothing to gain for investors, but entrepreneurs don’t want to risk running their company into the ground before the deal has been finalized.

Here are four ways to tell if your company needs a makeover before you try to offload it:

Your old plan isn’t working. Perhaps there is a lack of product-market fit or there’s conflict within the team. If you no longer believe in the company’s vision, perceive a threat from outside, and have no fundraising traction, you’d better grab a parachute and jump.

… Or you don’t have a plan. If you’ve finally hit a wall, with no more restarts and pivots, something is definitely wrong.

Only you see the problems. “Ideally, the outside world thinks that your start-up is doing great,” said Lewis. “Preferably crushing it; at minimum, doing OK. People on the outside don’t realize the sort of issues or concerns that you have within the company,” which might sound good, but could ultimately prove fatal as the cracks begin to show.

You have enough time. Lewis recommends entrepreneurs give themselves at least six months to plot their way out. Your team should have confidence in you as a leader and be able to work through this time.

Source: Start-up

Not being afraid to ask, “What’s in this for me?” makes women more in tune with their customers, says Forrester Research’s James McQuivey.

Entrepreneurs who want to be digital disruptors should pay more attention to how they use tech, says James McQuivey, vice president of Forrester Research.

During a conference held at New York’s Internet Week on Monday, the business man said women approach technology with a practical mindset. Whereas men are too focused on passion, women tend to see things from the customer’s angle and ask, “What’s in this for me?” This makes them in tune with their market and better able to serve its needs.

“Seeing the need on the other end of the technology, not the technology,” is crucial to being a digital disruptor, explained McQuivey. “Men can genuinely say they love their technology,” but “it gives us the desire to seek new things to love and to be content with their flaws.”

On the other hand, women “use technology,” but do not love it. Instead, they’re more focused on getting things done, connecting to people, and managing resources. It’s for these reasons they’re helping tech to evolve and become more user-friendly.

McQuivey also pointed out women tend to be better than men at creating product experiences, which are crucial to digital products and services.

Do you agree that women are pushing technology farther?

Source: Start-up

Mark Sutter explains why trying to win the “war on talent” is a losing battle.

For the past five years or so Google, Facebook and a handful of tech industry giants have been quietly buying scores of early-stage startups for their talent. And to keep up with the Jones’s it seems that Yahoo! has now employed the same strategy.

And who cares, right?

A couple of tech giants throw millions around in either cash (for which they have hoards) or part with some publicly traded stock. And a few teams of super talented, educated and bright entrepreneurs make a few mill. in their 20s. What could be more capitalist than that?

It has even gone so far that we now have evocative headlines in the tech press such as “Buy or Die,” which is what got me thinking about this post.

We’ve been here before–trust me. Every era has its own amnesia for M&A gone wild.

In the end, it doesn’t really matter. It’s not some big tragedy on a grand scale. But the press (and I suspect many of the senior execs of these companies) don’t really explore the corrosive downside of these acquisition.

So I thought I would.

Buy. Or Die.

Really?

If I don’t commit to millions of dollars of acquisitions I will … die? I’m supposed to believe that my best innovation can only come from scores of startup founders who just made millions and have now become CVOs at my company? (Chief Vesting Officers)?

Meh.

The Aqui-hire Business

Many buying companies price these deals on the basis of $1 million per engineer on the team for an early-stage deal. And they might give a premium if the team has been around a longer period of time, has built some hard-to-build proprietary technology or has some customer traction.

Usually the location of the engineers matters great so having offshore engineering makes acquihires unlikely.

Let’s assume an early-stage company around for two years with limited traction. It is probably purchased in the $5 to $15 million range even if you see higher numbers in the press.

Almost certainly the startup would have raised some capital. Let’s assume $2 million in seed money.

If the money comes from professional investors it usually has a “liquidation preference” meaning that their money comes out before the founders or common stock. (If you don’t know venture economics–there is an overview here.)

While at initial glance this sounds unfair, when you think about it — it doesn’t. If you give $2 million for 20 percent of a company ($8 million pre + $2 million investment = $10 million post-money valuation) that has no product and no customers and it turns around three months later and sells for $5 million it would hardly be fair for investor to get $1 million back (20 percent of the proceeds). That’s why liquidation preferences exist — downside protection.

After the liquidation preference the founders (probably one to three people) are likely to get 90 percent of the remaining proceeds and the staff — those engineers that the acquiring company so desperately wants — would ordinarily receive a very small proportion.

I talked about the math of this in this post, “Is it Time to Learn or to Earn.”

Mark, doesn’t the acquiring company mostly care about the super innovative founders? Those one to three you’re talking about?

If they do, then they’re naive. And most buyers aren’t. Most founders stick around for their lock-up period–one to two years–before going on to found their next company.

Think about it — they were the ones most willing and most able to take risk in the first place. They founded their last company with no money in their pocket. Now they get to go out and try again with $2 million in their pockets plus the credibility of having just gotten a big W.

Most founders stay the least amount of time they can.

I know the buyers try the best to believe that [insert well known founder name here ... David Sacks, Max Levchin, Dennis Crowley, Keith Rabois] will stay and help lead their company in a totally new direction. But evidence suggests otherwise.

So the buying company usually wants to pay $0 for the company. And wants to structure a huge payout for the employees that will remain. That way investors (dead money for the buyer) and founders (flight risk) don’t get all the spoils while the faithful staff who will stick around get nothing.

And precisely because buyers usually prefer to have limited money go to investors — investors almost always have the ability to say “no” to transactions in the terms of their funding documents (aka “blocking rights”).

And that is the tension in the acquihire — What is the purchase price for the company? What is the “earn out” if the acquired company hits some performance targets? What is the amount of money set aside for staff retention? And will investors allow a deal to happen in the first place?

The numbers you see announced in the press for deals are hardly ever right.

OK, Mark, we get the mechanics. But what is so corrosive about this?

Why Acquihires Hurt the Acquiring Company

How about if we look at it from the “rest of company” perspective?

You have been at Google, Salesforce.com, Yahoo! for years. You have worked faithfully. Evenings. Weekends. Year in, year out. You have shipped to hard deadlines. You’ve done the death-march projects. In the trenches. You got the t-shirt. And maybe got called out for valor at a big company gathering. They gave you an extra two days of vacation for your hard work.

And that prick sitting in the desk next to you who joined only last week now has $1 million because he built some fancy newsreader that got a lot of press but is going to be shut down anyways.

What kind of message does that send to the party faithful who slave away loyally to hit targets for BigCo?

I’ll tell you what is says.

It says if you want to make “real” money — quit.

Go do a startup. Get some famous angel or seed money. Get yourself in a big demo day competition. Woo the press. Hire legions of young, impressionable graduates from the top engineering universities. And then come back and sell me your company.

I know many rank-and-file employees. I’ve had the chats with them. You rarely meet people who don’t resent the scores of entitled acquihirees of their company.

Does Yahoo! et al really have to keep up with the Jones’s to build its future?

For the 200 new employees they’ll get through acquihires do they unleash 2,000 unhappy existing employees? Sure, most won’t quit. Because they know that it’s not a slam dunk to start a business and get acquired. But the most talented of those 2,000 will.

What if the $100 million you’re going to spend trying to win this alleged “war for talent” instead went into big retention plans to keep your most talented employees.

You can’t “Roll Out the Red Carpet When Your Best Employees are on the Way Out the Door” as I wrote in this post. So why not announce big, hairy audacious goals on recruiting the best mobile talent with sign-on bonuses and retention plans? And reward your existing top 10 percent of employees handsomely.

I’ll bet the ROI would be higher than acquihires.

Acquihires and Venture Capital

I’m a VC. I know I’m supposed believe in acquihires to bury my investments that aren’t working.

I would never discourage any teams of people I’m working with against early acquisition if they felt it was in the company’s best interests.

But that’s not how you make money in the venture capital business. You make money by backing winners that build real businesses.

I look for entrepreneurs who set out on their journeys to do exactly that–build big businesses. Change industries. Not looking for quick flips.

And on many occasions I have passed on deals where it was clear that the founding team was over-optimizing the deal structure to focus on a quick exit.

When I have great teams with products that are taking longer to show traction than they or I would like, I usually spend time trying to figure out how we can build a better business versus selling early.

I don’t blame entrepreneurs who go for an early exit when it comes up. To the contrary. On many occasions where I’ve met with teams of people in whom I’ve never invested I’ve encouraged exactly that — an early exit at a “small” price. Because if your business isn’t working or isn’t likely to work, it’s obviously better than running into a brick wall or over-capitalizing yourself.

And, of course, many small acquisitions work for the buyers when there is a clear strategy for owning the asset or a clear alignment with the team you’re acquiring.

But as a repeatable strategy for large companies to try and compete with each other it still strikes me as a wasteful strategy. And few in the press are willing to call this out.

Sarah Lacy did. It’s why I love reading her writings — she’s one of the few remaining journalists in the tech sector (along with Kara Swisher and a few others) who have been around long enough to have earned their critical eyes or cynicism.

She wrote this excellent piece last year called, “The Acqui-hire Scourge: Whatever Happened to Failure in Silicon Valley.”

And I thought I’d finish with a quote from Sarah:

“Allowing entrepreneurs — and their investors — to save face by saying they were “acquired” instead of failing is nice, but it’s a bit like the pre-schools where everyone wins a trophy for showing up.”

Source: Start-up

The innovative production company received top honors for its brand-driven content this week.

It’s no secret the advertising production company B-Reel is changing the industry. The company made waves last year with the viral sensation The Wilderness Downtown, and this year it released The Beauty Inside, an interactive branded film that invites viewers to play the lead role.

On Friday, B-Reel announced it had swept the prestigious CLIO awards, winning not one, but two Gold distinctions in the Film and Branded Entertainment categories. Other recent award wins include six One Show awards, two Golds for SXSW, five Art Directors Club awards, and four Webby awards.

“The Beauty Inside is a truly integrated project, where the boundaries between traditional storytelling and user interaction is totally blurred,” Pelle Nilsson, executive producer and founding partner, said in a statement. “And it shows that a great collaboration between agency and production company is what makes for outstanding execution.”

B-Reel, which has its roots in Scandinavia, has traditionally shied away from straightforward ad work, even as it lacked the technology.

“Limitations are frustrating, but they can also trigger a really creative side in you,” Petter Westlund, the company’s chief creative officer, said of the company’s hacker mentality. To date, the company has created dazzling ad campaigns for Mitsubishi, State Farm, Doritos, and Google.

The Beauty Inside is not the first B-Reel production to receive accolades this year. Both that film and another short for Google Maps Cube received numerous nominations and won four Silver Pencils and one Bronze Pencil from The One Club, which promotes excellence in advertising and design.

B-Reel currently runs six offices worldwide and five divisions, including commercials, content, digital, feature films, and products.

Source: Start-up

One YC partner makes an exit, while Paul Graham introduces five new ones–including Groupon founder and ex-CEO, Andrew Mason.

Y Combinator founder Paul Graham took to his blog yesterday to announce the hire of four new part-time partners–including Groupon founder and ex-CEO Andrew Mason.

The other part-time partners, who will advise the next class of YC start-ups, include Michael Seibel, the founder of Socialcam, Steve Huffman, the co-founder of Hipmunk and Reddit, and Dalton Caldwell, the co-founder of Imeem and App.net.

Kevin Hale, the co-founder of Wufoo, will join YC as a full-time partner.

“We’ve known all these guys for years and we can already tell it will be great to work with them,” Graham wrote. Harj Taggar, the first-ever YC partner will be leaving the firm.

But the big news here is the surprise return of Andrew Mason, the Groupon founder who was, for all intents and purposes, canned from his last gig as Groupon’s CEO. He’s not just becoming a part-time partner at YC, either. In a blog post on his own site–timed with Paul Graham’s post–Mason had a few announcements of his own.

“If there’s a silver lining to leaving Groupon, it’s the opportunity to start something new,” Mason wrote. “I’ve accumulated a backlog of ideas over the last several years, my favorite of which I’ll be turning into a new company this fall.”

He doesn’t offer many details about the new company, but Mason also used the post to announce a third new project that’s currently in the works–a music album targeted at young people entering the workforce.

Yes. For real. (Well, so he says. But honestly, we’re talking about Andrew Mason, after all.)

In his words:

I came to realize that there was a real need to present business wisdom in a format that is more accessible to the younger generation. It was with this in mind that I spent a week in LA earlier this month recording Hardly Workin’, a seven song album of motivational business music targeted at people newly entering the workforce. These songs will help young people understand some of the ideas that I’ve found to be a key part of becoming a productive and effective employee.

We’ll be sure to stay tuned.

Source: Start-up

Yes, you can enjoy the warm weather and stay sharp at work. Here’s how.

Summer is almost upon us. Roll out the barbeques, calm the kids, and … begin the inevitable hand wringing about the slump in productivity at work.

Warm weather, vacation distractions, and a general easy feeling can add up to productivity declines of 20 percent, according to one study released last summer.

But must your joy be marred by concerns that your business will suffer? Can’t you enjoy the summer and keep things humming at work? Rest assured that you can.

Constant work isn’t the same as maximum productivity. Discipline has its limits, and flexibility its advantages.

Here’s The Atlantic defending the right of the man with the toughest job in America–the president–to go on vacation:

“Breaks are better for our brains than overtime. Where you get your break — from an hour on blogs, a day in the park, or a week golfing at Martha’s Vineyard–doesn’t matter so much as that you get it. If you care about your own productivity, don’t be afraid to goof off online. And if you care about decision-making at the national level, tune out the critics and root for your president’s golf game.”

If psychological and management research shows the president is more productive with a vacation, shouldn’t you go on one too?

If you shouldn’t feel guilty about taking off work, you shouldn’t have to plan every break with your team. With people off on holiday, “summer means you might have to tackle projects without a critical team member, or pinch-hit for a co-worker to keep the wheels turning,” says Brazen Careerist. “If your organization doesn’t already have a shared vacation calendar, spearhead the effort to create one.” Basics like communicating plans in advance, working ahead, and covering essential tasks should all be written down.

One of the biggest productivity drains over the summer is all the time you spend daydreaming about being somewhere else. Rather than fight this weather-induced daydreaming, roll with it. But keep working.

“If work is starting to feel a little stale, you may be able to get a kick-start simply by changing your routine or environment. Try getting outside more during the workday (e.g., holding meetings outside or taking a walk during breaks) or working at a coffeeshop for some renewed creativity,” suggests Lifehacker. Studies have shown “telecommuting helped workers increase their productivity in the summer.”

Keep this in mind not just for yourself but your employees. Will forcing them to stay cooped up in the office make them feel motivated?

“Achievements trump hours spent,” writes Forbes’ Jacquelyn Smith. “Just because you’re in the office for the required eight hours doesn’t mean you’ve done your job.”

She has a good point: Business owners shouldn’t fetishize face-time. Get out if it helps get more done.

How do you keep productivity up over the summer?

Source: Start-up