What does an average US SVP of sales earn these days?

February 15, 2007

The following data came from an email from Taber Consulting. It’s a real pity that when you go to their web site you are forced to look and listen to lift music for a 28 second flash presentation before you can get to the home page and there is no button to bypass it! I thought those days were long gone! It’s a pity ‘cos there is some excellent information on their web site.

I would not recommend using these US corporate salary levels in your average start-up business plan…

The data below are for public and private companies with a direct sales model and revenues below $250 M/yr. We’re showing the averages, but specifics vary widely for individual firms. Thanks to PhoneWorks for these data.

The average SVP or EVP of Sales has an base of $187K/yr, and a commission structure of $170K/yr. To meet these average on-target earnings, they must achieve an overall quota of $31M/yr, and manage a staff of 14 (~10 reps).

The average VP of Sales pulls in about 10% less in most of the numbers, yet carries about the same quota and has to work with a price point that’s lower. Seems as if the extra $$ for an SVP is due to the complexity of the sale (length of sales cycle/high price point) and the skills/seniority of the leader.

These numbers reflect a gradual downward trend over the last few years. Quotas have moderated and price points have trended lower, so commissions have decreased as well. Similar trends have occurred in individual rep pay.

As you’d expect, Inside Sales compensation is significantly lower:

  • Sales development – lead cultivation and appointment setting — has an average total package of about $130K for the manager and $80K for the rep.
  • Telesales reps – who actually close deals – average $165K for the manager and $110 K for reps.
  • Inside Sales Senior Mgt average $206K/yr and have to manage a quota of $63 M and a team of 22. The quota numbers are higher because of the short sales cycle and higher transaction volume.

Are entrepreneurs born or made?

February 13, 2007

In the Sunday Times on Sunday 11th February, there was a interesting article entitled Are entrepreneurs born or made? Which talks about a theory put forward by Adrian Atkinson of Human Factors that entrepreneurs are born not made – no matter how much effort the individual puts in. To quote, “This theory that anyone can become an entrepreneur is absolute nonsense”.

Contentious stuff indeed. This may be applicable for lifestyle start-ups where you are going it alone, but I think it’s a real stretch to apply this to a start-up where real team effort is required – and looked for from VCs.

Yes, of course a focused, driven, visionary individual is always required to drive things forward, but to use a simplistic evaluation about whether you are prepared to mortgage your house and work seven days a week to evaluate whether you will make an entrepreneur is just not realistic – contributing characteristics yes.

Unless, you start a business before you get married, have children and sign up for a damn big mortgage just to get a roof over your head (or decide not bother with all these trivialities of life). Or you start later in life when the children have grown up (you can’t say “and left home” these days can you?).

Mind you, if you score low and believe what you are being told, then you are definitely not of an entrepreneurial bent. A real entrepreneur will shrug this off and get back to the job of making their venture successful no matter what – but this would mean you do have a good entrepreneurial attitude! You will only find out whether you are an entrepreneur or not BY DOING.

Anyway, if you want to find out whether you will be successful as an entrepreneur you can spend 5 minutes completing the following questionnaire or go to the web site and spending some money – www.humanfactors.co.uk/pep

How to see if you have what it takes

For each of the following five groups of statements choose the one that best describes what would be most Important to you when starting your business.

Group 1
A Working with other like-minded individuals
B Making a big effort to get the company structure right
C Willing to work seven days a week
D Realising that technical excellence is the key to success

Group 2

E Getting some qualifications before starting your business
F Only starting the business with all the finance in place
G Keeping your existing job until your business is established
H Seeing work as relaxation

Group 3

I Making sure you have a social life as well
J Be willing to sell your house and car to start your business
K Taking your time to make all the important decisions
L Plan your exit strategy from the beginning

Group 4

M Not selling more than the company can deliver
N Making sure the product is perfect before getting sales
O Be willing to fire people who perform badly
P Developing business plans to make strategic decisions

Group 5

Q Always involving colleagues in decisions
R Only aiming for the highest quality
S Be willing to sacrifice family life to build the business
T Realising that all that matters in business is making money

Score 4 points each if you chose C, H, J, 0, S
Score 3 points each if you chose A, E, L, P, T
Score 2 points each if you chose B, F, K, M, Q
Score 1 point each if you chose D, G, I, N, R

To see your what your score means:

Read the rest of this entry »

The phenomenon of Ipsilon

February 8, 2007

Part 1: The demise of ATM

You don’t read this sort of review about a start-up too often do you?

“A year ago, they were the Beatles. When Ipsilon Networks, Inc. touched down in March 1996, it whipped the industry into a frenzy with its hooky melodies and breezy harmonies on IP switching. Ipsilon’s chart-busters included tunes on establishing cut-through IP routes over ATM, snubbing complex routing dogma from standards groups, and divorcing enterprise nets from the self-centered Cisco Systems, Inc.

The industry was transformed into a screaming, blubbering mess, tearing its locks out pleading for more, more IP switching. But that was yesterday. Today, Ipsilon is but a nostalgic footnote… ” This quote was from Nokia catches a falling Ipsilon by Jim Duffy Network World, 12/9/97.”

Phew! I first came across Ipsilon one wet winter’s morning in 1996 I think. I can’t quite remember which newspaper it was in, but there was this small 3″ column on the right-hand side of the page that talked about a revolution in networking – such a headline would always catch my eye!

I immediately added them to my list of companies that I wanted to visit the next time I was in Silicon Valley. I did, and what I heard changed many of my views. So just what was so seminal about Ipsilon that caused all the frenzy?

One of the key strengths of the Internet Protocol (IP) was that it was resilient. If a particular node or router had problems, packets would find an alternative path to their destination if there was one to be found. In fact, this was the core capability of the routing algorithms that were used to move IP packets around a network. OSPF (Open Shortest Path First) was the most common routing protocol developed for IP networks and it was based on finding and using the shortest path first.

However, this algorithmic approach although having many benefits, was flawed in a particular area that remains with us even today. The flaw was that it was possible for individual packets in a particular packet stream to take different routes between the source and the destination depending on congestion. For downloads based on TCP/IP this did not particularly matter as the packets could be reconstituted into the correct sequence no matter in which order they were received.

BUT, this causes a major problem for real-time services such as voice over IP (VoIP) or interactive video conferencing where latency beyond, say 200mS, causes a noticeable hesitation which significantly affects the quality of conversations. Having to wait around for all the packets to arrive and reorder them could add significant latency. We all have heard this effect when using services such as Skype.

Another issue behind Ipsilon was that IP routers at the time were very expensive. As ATM was seen as the next dominant technology at the time, every man and his dog were producing ATM switches. In reality, ATM was not seeing the enterprise uptake expected by the vendor industry, price wars broke out and ATM switches became available at reasonable costs.

The light that went on in the Ipsilon founders’ brains was that if they could embed enhanced routing software on generic ATM switch hardware, they would have a competitively costed router that would use ATM functionality to provide, what they called, cut through routing or IP Switching as shown below in one of Ipsilon’s presentations.

This involved taking off-the-shelf ATM switchs, throwing all the ATM software away and replacing it with enhanced routing software. What this meant in practice was that the only bit of ATM that remained was the physical switch fabric and the ability to set up a virtual connection from one end of the network to another so that data can be transmitted in one hop only.


Ipsilon’s vision for ‘cut through’ routing.

To quote Mary Petrosky from 1998:

“Although the ATM Forum had been working on a short-cut routing solution called Multiprotocol Over ATM for some time, Ipsilon Networks catalyzed the industry in the spring of 1996 with the announcement of its scheme, dubbed IP switching. By exploiting ATM switching hardware with a new set of IP-oriented protocols, Ipsilon promised to deliver millions of packets-per-second throughput, compared to the forwarding rate of hundreds of thousands of packets per second supported by the current generation of routers.”

This was really magic stuff and went right against the core Internet philosophy of the time which focused on what was known as connectionless routing. i.e. a packet would be dumped into the network and it would follow whatever path it could to reach its destination. Engineers that supported this approach were colloquially called ‘netheads‘.

Whereas exponents of cut-through routing followed the routing principles of the Public Switched Telephone Network (PSTN). Here, a path between network (domain) ingress and egress was set up prior to sending the packets into the network which is called deterministic routing. Of course, exponents of this approach were enevitably called ‘bellheads’. It sometimes felt that there was outright war between these two factions! In fact both were right in their own way.

Deterministic routing is crucial to obtaining sufficient Quality of Service for real-time services and the insight provided by Ipsilon turned the industry on its head. One of the early pre-MPLS IETF standards Transmission of Flow labelled IPV4 on ATM networks, drafted by Ipsilon, makes an interesting read.

Although I do not know (more likely can’t remember!) all the industry inside stories, it was clear that this concept was not foreseen by Cisco or any of the other big equipment vendors of the time.

You can read the full story of Ipsilon in the article linked above, but sadly Ipsilon failed as a company due to insufficient sales and were sold to Nokia in 1997. To quote Nokia’s press release:

Nokia will acquire Ipsilon Networks, Inc., on December 9th, 1997, a data communications company based in Sunnyvale, California, US, for approximately USD 120 million, subject to regulatory approval expected by end of the year…Ipsilon Networks is a leading innovator in the development of open Internet Protocol (IP) routing platforms.”

To quote David Passmore:

“Ipsilon also discovered that shortly after turning everyone on to IP switching, Cisco froze the market with Tag Switching and Multi-protocol Label Switching.”

“It’s obvious that Ipsilon basically failed in their mission to establish IP switching,” Quite frankly, the whole cut-through routing technique embodied by IP switching, 3Com FastIP and Cabletron’s SecureFast doesn’t make sense anymore in this era of gigabit, wire-speed routers.”

Once the cut-through routing idea hit the market, all the major IP equipment vendors jumped on the bandwagon. In particular, Cisco announced proprietary Tag switching (which was rumoured to be a an Ipsilon killer and, if so, succeeded in that ambition) which eventually morphed into the IETF’s Multiprotocol label switching (MPLS) standards still in use today.

Ipsilon was a seminal start-up in networking that transformed the industry and had a completely unique approach to market. It had so much going for it, but maybe being #1 with an idea is not always a good position to be in – especially when your competitor is a behemoth such as Cisco! My view is that they were just well ahead of of their time and trying to re-educate the world is just too much of a challenge when all thier backers wanted was sales.

To finish, Dave Passmore made an extremely pertinent point back in 1997 that could be just as applicable today: “[IP switching] doesn’t make sense anymore in this era of gigabit, wire-speed routers.” More about this later.

Next: The rise and maturity of MPLS

Name that start-up – simple?

February 6, 2007

Back in December 2004, there was article in the US magazine Business 2.0 entitled The New Science of Naming. This excellent article talked about the history of the ways companies chose their company’s name and the current fashions that determined their approach.

The link above points to the text, but the most interesting part were the four graphics reproduced here on the left. (I hope I do not get into trouble reproducing them here but in amelioration, Business 2.0 really is an excellent magazine!)

In the early days of mass production, eponyms – companies or products named after the people who created them – used the comforting familiarity of personal names to evoke traditional ideals of quality and craftsmanship.
Industrial firms with long, descriptive names gradually embraced the shorthand acronyms used by customers and employees alike. Like New York Stock Exchange ticker symbols, these two- and three-letter names made companies seem larger than life.
Company names became abstract as the computer age got under way. Names often sought to imply high-tech precision, encouraging customers and investors to em­brace the future. Seldom-used let­ters like ‘X’ were believed to have extra potency.
Hooked on the idea of synergy,companies adopted meaning­less umbrella names that could accommodate expansion into multiple lines of business. Dur­ing the dotcom boom, the rush for online addresses pushed this logic to absurd extremes.

Following my earlier post, The Art of the Start by Guy Kawasaki that talks about company names, it’s interesting to ponder about what the appropriate strategy for naming companies should be in 2007. If you look through TechCrunch’s list of Web 2.0 company names, there are some really unmemorable ones! To quote the article:

Today’s style is to build corporate identity around words that have real meaning. Aucent’s transition to Rivet is a typical effort to eliminate the obfuscation of the Internet era; the preference now is to name things in the spirit of what they actually are. The new names are all about purity, clarity, and organicism. Rivet helps companies tag financial data, for example, so the name functions as an effective metaphor for what the firm actually does. Similarly, Silk (soy milk), Method (home products), Blackboard (school software), and Smartwater (beverages) are new names that are simple and make intuitive sense.

“There’s a trend toward meaning in words. When it comes down to evocative words va straightforward names, straightforward will win in testing every time,” says Jeff Lapatine, group director of naming and brand architecture at New York branding firm Siegel & Gale. That hardly comes as a surprise, of course. But why has it taken so long for this idea to catch on?

Here are a few things that come to my mind:

  • The name should be a domain name. This is very challenging as it seems to me that you can string any three words together and the name is already taken. Also, choosing a ‘simple’ name will enevitably cause problems when trying to find an untaken domain name.
  • The name should be a ‘xxx.com’ NOT a ‘xxx.net’ where ‘xxx.com’ is another company! This happens so often when a name is chosen first then someone decides to use WHOIS.
  • It should associated with what the company actually does i.e. the company does as it ‘says on the can’.
  • The name xxx should be spellable. If you can’t spell it intuitively then no one will be able to enter the URL into a browser.
  • The name should be pronouncable. If the name does not have a unique pronounciation, then everyone will say the name differently e.g. do you say Skype with a silent ‘e’ or do you say Skypeeee with the ‘e’ pronounced? It’s very confusing.
  • As Guy Kawasaki commented, if it can be used as a verb, or in a sentence that would be good.
  • If the name can also contains a call to action such as “You can ContactMeAnywhere at any time!” (They probably don’t say this – or do they?) so much the better.
  • Don’t use hyphenation to get round taken domain names.
  • Don’t choose a temporary name that you plan to change later – that’s just a cop out and will put in jeapardy all the early launch publicity you might receive.

I reckon that chosing a company name is one of the most difficult tasks facing a new company and the effort and arguments that can ensue during the process are to be seen to be believed.

Oh and lastly, please don’t spend thousands of dollars buying a name from a domain horder – start as you mean to go on by being frugal.

The Art of the Start by Guy Kawasaki

February 2, 2007

The Art of the Start is a book released by Guy Kawasaki in 2006. Guy also has an excellent blog focussing on issues faced by start-ups. A recent post is particularly interesting:The Top Ten Stupid Ways to Hinder Market Adoption which contains 14 points to avoid if you want to make your web site or service user friendly. There are a couple of things I’m definitely going to have to look at!

I bought his book last year and, taking my copy off the bookshelf, I found it to be stuffed full of pink post-it notes. Here are some of the things that grabbed my attention along the way:

POLARIZE PEOPLE: When you create a product or service that some people love, don’t be surprised when others hate you. Your goal is to catalyze passion – pro or anti. Don’t be offended if people take issue with what you’ve done; the only result that should offend (and scare) you is lack of interest.

I have to say that is a sentiment I whole heartedly go along with and found this with trymehere when I have shown it to some people. One well known analyst said “I wouldn’t be seen dead using it”, while another said that it “solved one of his daily problems”!

[When asking colleagues about what they think of your service] My final tip is that you ask Women. My theory is that deep in the DNA of men is a ‘killer’ gene. This gene expresses itself by making men want to kill people, animals, and plants. To a large degree, society has repressed this gene… Hence, asking a man about a business model is useless because every business model looks good to someone with the Y chromosome… Women by contrast do not have this killer gene. Thus, they are much better judges of the viability of a business model than men are.

Well, I started doing this a little bit last year but the jury is still out for me. However, it feels right!

PICK A NAME WITH “VERB POTENTIAL.” In a perfect world, your name enters the mainstream vernbacular and becomes a verb. For example people “xerox” documents – as opposed to photocopy. Names that work are short and not tongue twisters.

I particularly like this thought because it lets you use the company name in interesting ways in text describing your service. Although I wouldn’t propose this as an ideal example, a web service called ConnectMeAnywhere is quite an appealing name. Another is GoToMyPC .

These requirements [talking about bootstrapping a business] point to products, services and target markets with the following characteristics:

  • People already know, or it becomes immediately obvious, that they need your product or service. You don’t have to educate your potential customers about their pain.
  • Your product or service is “auto-persuasive.” That is, once people recognize their pain an how your solve i, they can persuade themselves to take the next step and buy what you’re offering.

This is a good aim but very challenging to realise, but it does show that articulating the industry pain you are solving is very important not only to potential investors in your business , but also transparently to potential customers.

Well, that’s just a few of my pink post-it notes and all the others indicate points that are just as stimulating. If you are open to new ideas then reading this book will enevitably trigger some new activities! Go to it!

Service edge routers: the challenges of start-ups

February 1, 2007

You often see lists of companies that have recently raised significant sums of money from the Venture Capital markets. We also often talk about the high attrition rate from companies who started up in the late 1990s just before the so-called telecomms nuclear winter.

I thought it might provide some insight to select one of the most interesting segments (it was for me anyway) for equipment start-ups in the USA – Service edge routers / switches and see how those companies have fared over the last few years.

There are sectors that attracted far more entrants than the one I’ve chosen to look at such as optical switches or Operational Support Software (OSS) for service providers. I may take a look at these later.

Below you can see a list of the companies I had noted operated in this sector. Please note that the BIG vendors such as Cisco, Alcatel and others are missing from this list as I was looking at true start-ups. Even now I notice that at least a couple of companies that are not on the list…

Note: If I found an announcement about the aquistion or closure, I’ve provided a link. It’s also interesting to see where the web site URLs have ended up by clicking on the company names!

Company   Status
Atreus   Still going
Ellacoya   Still going
Extreme Networks   Still going
Quarry Networks   Still going, Now Reefpoint
Amber Networks   Aquired by Nokia, 2001
ASC   Acquired by NSGDatacom, 2002
Laurel Networks   Acquired by ECI, 2005
Fore Networks   Acquired by GEC, 1999
Riverdelta Networks   Acquired by Motorola, 2001
Riverstone Networks   Acquired by Lucent, 2006
Spring Tide Networks   Acquired by Lucent, 2000
Unisphere (Redstone)   Acquired by Juniper, 2002
WaveSmith Networks   Acquired by Cienna, 2003
Allegro Networks   Closed down 2003
Asita Technology   Closed
Celox Networks   Closed, 2002 Spent $155
Coree Networks   Closed 2001
Corona Networks   Closed 2003
Equipe Networks   Closed 2004
Ennovate Networks   Closed 2001
Gotham Networks   Closed 2002
Tachion   Closed 2001

Of the 22 companies listed:

  • 18% are still going.
  • 41% were aquired (I assume under distressedconditions).
  • 41% shut their doors.

This shows that the early years of the century must have been pretty traumatic for the founders and employees of 80% of the start-ups noted here. I doubt that the attrition rates is much lower in other segments either. I was told many years ago that 9 out of 10 start-ups fail and it looks like this is true for this sector anyway!

I guess this sector is pretty much dominated by the big boys these days as much of the specialist service capabilities – security, IP-VPNs etc – slowly became bundled into stock routers.

Ryan Carson on UK start-up 101

January 29, 2007

I came across a really interesting set of posts the other day from Carson Ryan’s blog detailing his experiences and providing advice about getting a new business off the ground in the UK. Although I havn’t read them all as yet, what I did read made a lot of sense!

  1. Small Biz 101: How to get started
  2. Small Biz 101: Cash flow
  3. Small Biz 101: No one starts with a masterpiece
  4. Small Biz 101: Tips for Increasing
  5. The cost of bootstrapping your app: The figures behind DropSend (part 1)
  6. The cost of bootstrapping your app: The figures behind DropSend (part 2)
  7. How to Build a Successful Web Startup in the UK
  8. How to Build a Successful Web Startup in the UK : Cash Flow
  9. How to Build a Successful Web Startup in the UK : Hiring Freelancers
  10. How to Build a Successful Web Startup in the UK : Promoting Yourself – 15 Do’s and Don’ts
  11. How to Build a Successful Web Startup in the UK : Getting a Merchant Account

Take a read!