Every wonder how to spot a crappy company? Oh, I have so many ways. I have been working up the idea for this entry for a while but haven't had the angst-ridden energy to pull it off until today. Throw in a lack of sleep and five cups of coffee, and I'm there.
My research on crappy companies goes back about 16 years, as long as I have been covering the technology industry. What many people forget in the technology industry is that contrary to the Silicon Valley popular belief, most companies suck. In fact, the vast majority of venture-backed companies fail and there are really only a few public companies that rise to greatness. And when they're great, it's usually because they are run by a bunch of greedy, preppy asses with no life nor a sense of humor.
If you are an investor, this is a big problem.
This is why it's right to be skeptical, analytical, and do your homework. You will get burned. So, without further ado, here are my top things to look for in order to spot a crappy company:
1) Lead marketing guy has bad breath, a bad wardrobe, and a cold, clammy, and limp handshake.
2) The reception area has no receptionist because some arrogant VC on the board thought they shouldn't splurge for that. Bad move. Walking into an empty room with a handwritten note that says, "Call Bob at ext. 234" is about the worst first impression you can make.
3) The bathrooms are dirty. I could give you more color here, but you already get the picture...
4) They can't show you the product. Or, they show you the product and it doesn't work.
5) The CEO isn't available to meet because he's yachting in the Cayman Islands.
6) The S-1 filing contains at least four related party transactions, including a annual sales meeting that was catered by Billy Joe Jimbob, the VP of Sales's stepbrother in Tuscon, AZ.
7) The company press kit consists of a black & white photocopy of an old press release
8) The company is 80% sales people ... or
9) The company is 80% product people, with one sales person ...
10) "We don't do a lot of marketing."
11) VP of Business Development offers to take you to a strip club after the first meeting.
12) There is one customer
. This customer appears to be extraordinarily large. The company is very small. There is an air of mystery about how this one tiny company got such a huge customer. Figure it out, there's a reason. And it's not good.
13) Earnings appear suspiciously predictable. The company keeps buying other companies
. The CEO has the ego the size of a truck. This CEO appears to be obsessed with his company's stock price.
14) Company keeps moving into larger, shinier, more extravagent headquarters buildings. But you still have trouble getting your calls returned. Or they still don't have a receptionist.
15) Company has a generic Web 2.0 name like, "Yoono,"
and the lead marketing person thinks Web 2.0 is "really cool."
16) The company issues press releases using celebrities.
17) Company contact page has Web forms instead of real phone numbers.
18) "We're leveraging our core competentcies
." I once thought I made this phrase up as a joke. Then I found it on the Internets.
19) Ask around. You hear stories about managers calling employees "bipolar psychotics,"
or there's regular sex harassment suits against the CEO, or the executives are spending all their time hanging out at a hedge fund
20) Media figures and "analysts" appear to bend over backwards coming up with esoteric ways to praise the company's business model
. When you read it over and over, you still can't seem to make sense of it.
21) There's wayyyy too much business going on in Russia and China.
22) The company is ready to synergize, move forward, give you the 50,000-ft. view, and grab the low-hanging fruit.
23) The company hasn't been doing well and the management team is addicted to mergers
. This is a sign of distress and denial.
24) Top executives are regularly dumping lots of stock