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There is a perfect storm of three distinct disruptive forces that has the potential to topple nearly every major enterprise software incumbent. And the traditional approach of dealing with technology shifts – through acquisition – looks like it’s headed towards failure. As such, there is an unprecedented opportunity to create many, new multi-billion dollar enterprise franchises that are on the right side of these forces and are willing to go the distance in the face of ridiculously high acquisition offers.

Let’s examine these forces individually:

Software as a service (Saas): Seemingly a little long in the tooth as a disruptor, Saas has finally gone mainstream in the Global 2000. The primary disruptive force of this technology is the speed of innovation. The feedback loop is especially powerful: as opposed to using focus groups and surveys to figure out how users are interacting with the product, Saas companies can see what their customers are doing real-time by capturing and analyzing every click. They quickly extend their products through a “cell division” that continuously builds out and A/B tests the features that are getting the most engagement. On-premise and client (PC) software-based product cycles can’t possibly compete here as new releases are typically pushed 10 times faster at 45-60 days vs 18-24 months. There’s always one version/code base so it’s much easier to support, patch bugs, and roll out new features to all customers at once. The old joke of “How did God create the world in 7 days? He didn’t have an installed base!” certainly applies – but Saas also demands entirely new skills sets associated with running a 24×7 services business. Dev/Ops, customer care centers, network operations and delivering uptime via failover, mirroring and hot backups are all new and essential. It’s easy to see how the early Saas pioneers gained so much ground with this innovation but even they are unprepared and poorly architected to take advantage of the additional disruptors that have hit more recently…

Cloud infrastructure: As I detailed in a prior post, “The Building is the New Server,” the humongous internet powers, Facebook and Google, are literally breaking new ground in re-imagining the design, components and cost of running a hyper-scale data center. The cloud infrastructure they are pioneering has the primary disruptive force of massively driving down cost. Facebook, for instance, is experimenting on the bleeding edge of solving the new cost bottlenecks of power and cooling. I recently read that it actually rained inside one of their datacenters. The cloud service providers (CSPs) are following their lead using commodity components, open source software, data center design and testing software defined storage and networking products to enjoy the same, devastating cost curve. The corporate datacenters (aka “private clouds”) will slowly disappear as Global 2000 companies migrate to these irresistible new cost curves. Don’t be fooled that security and reliability concerns will keep large enterprises away – as the CEO of IronPort, I watched in horror as large enterprises started pointing their treasured Mail Exchange (MX) records to cloud services like Postini – a much superior and vastly cheaper cloud based architecture versus our perimeter appliances. And email is the most sensitive and mission critical of applications…

Mobile: About two years ago, all of our consumer companies went through an “Oh shit!” moment with mobile. One year mobile was 10% of traffic and the next year, when everyone was expecting ~20%, it was 30% on it’s way to 50%. Facebook, for instance, famously bought Instagram for $1B and then continued their pursuit of talent to redesign for mobile. The new mobile operating systems and devices are proliferating an entirely new interaction and design paradigm that has the primary disruptive force of a re-imagined user interface. The innovative use of touch/gestures (e.g. pull down, swipe, pinch etc.) pioneered by the consumer applications will become de rigor for enterprise as well. Although it’s still early, the mobile sensors (e.g. GPS, accelerometer, video etc.) will also become integral and spawn new innovations in the enterprise as they have enabled new consumer franchises like Lyft and Instagram. The number one problem facing so many of the startups I talk to is hiring the design talent (e.g. Mobile app, front-end engineering and user interface) to take advantage of this trend. In addition to being in ridiculously high demand, most of these people are “arteests” who eschew just cash and stock as incentives because they want to work for a purpose and in an environment where design is an overarching priority/core competency – not something that is grafted on afterwards. These environments are hard to find.

So exactly why won’t these big incumbents make it to the other side? There are just too many things changing at once. Beyond the technology changes, there are structural impediments as well. The incumbent sales forces have become farmers instead of hunters. They still sell on relationships (e.g. A round of golf, anyone?) and bundling/discounting instead of product attributes. They sell to the CIO instead of the line of business buyer who is making the decision. The quotas and incentives are too different. The accounting systems don’t speak recurring billing and revenue. Ugh – it’s just too much change…

A handful of exits have been priced based on a NTM revenue average of 11X vs around 4X for the rest of Saas companies. Examples include Workday, Splunk, ServiceNow, Marketo and Tableau. Not to mention the SuccessFactors deal (done at 11X) has officially kicked off the next wave of consolidation. On the private side, companies like New Relic, AppDynamics and ZenDesk have seen private transaction multiples of between 9X and 11X.

There is outright panic going on right now at the large incumbents as they pay ridiculous premiums for the early Saas companies. And so why won’t these acquisitions pan out? Most of the early Saas companies weren’t architected to take advantage of the cloud infrastructure cost advantages AND most completely missed the boat on mobile. It’s hard enough for new, cool enterprise startups to hire the necessary design talent but the large incumbents really have no hope.

Next Up

As I’ve said, there is a perfect storm of three distinct disruptive forces brewing which has the potential to erupt into a new multi-billion dollar wave of enterprise franchises. In particular, there will be at least 30 new enterprise franchises that will go the distance, resist high acquisition offers as they either supply or ride this trio of disruptors to dominance.

Amongst others, the new suppliers are companies like Cumulus Networks, Okta, New Relic and Nimble Storage. The “riders” are awesome trifecta companies like Box, Evernote, Base, Expensify and Tidemark.

Where will these 30 New Franchises come from? A double investment cycle in Saas, as the large incumbents buy the early Saas pioneers and fumble them, will pave the way. Like Lenny from “Of Mice and Men,” they will smother these companies with too much negative attention, mismatched salesforces, and misunderstood business models. Following a short vesting period, the product and management talent – who are used to working at a completely different pace – will ultimately leave the incumbent, resulting in a bevy of entrepreneurs that roll out to start even more of these franchises.

I can’t wait to meet them!

🙂

All great pitches have a few things in common: the founder/team is wicked smart, the idea is big and a breakthrough, and the market is potentially enormous.

But the best pitches are also usually non-obvious and unique to the particular entrepreneur’s story and background. “Founder/market fit” is important. Does the founder’s life story, educational background, personal struggles, Ph.D thesis, or prior work experience somehow qualify them to unfairly prosecute the opportunity they are pursuing? At our firm we always start off our meetings with a deep dive into the entrepreneur’s background, and the most convincing pitches literally pour out of them with some deep connection or “aha” that led them into the business they are explaining. By doing so, the idea is unique/original and is presented authentically versus a canned sales presentation.

A lack of originality and authenticity is probably the biggest turnoff. Stereotypically, this can be a couple of MBAs that have been churning through different business ideas in order to find something that might make them rich. Or it could be a hired gun/former sales VP as the CEO adopting or explaining someone else’s idea. In both cases, they typically have done a superficial, McKinsey-esque market analysis but have no passion or connection to the business.

Another important quality of a “perfect” pitch is when a founder exudes in many different ways, the confidence and courage to go the distance, against improbable odds, to make an enduring or lasting business. They come off as expertly informed, determined and unflappable during the hard questions. And they usually lay out a series of chess moves that reveal an even bigger ambition: “If we do this, then we can do that…”

A lack of confidence is also a huge turnoff – usually typified by a single slide in the deck entitled, “Exit Strategy or Exit Options.” This is the kiss of death for our firm.

This post originally appeared on the WSJ Accelerators Blog.

One of the most famous hackers in the world, Kevin Mitnick, published a book about his exploits — “The Art of Deception” — after he got out of prison. This guy broke into corporations, government agencies – even the FBI cell phone network to find out they they were closing in on him. Surprisingly, the most interesting “a-ha’s” of the book weren’t related to his prowess behind the keyboard but something much simpler — he was a master of “social-engineering.” Kevin would get unsuspecting staffers on the phone and trick them to reveal passwords, backdoor locations, and critical tidbits of information to enable his hacking. He used well-worn techniques like urgency, name-dropping, and a folksy familiarity that were popular in the Depression era and updated them for the modern times.

Kevin Mitnick was not alone.

Most of the largest online fraud hauls begin with a live telephone conversation. The existing caller ID infrastructure is useless as there are plenty of software options available for fraudsters to spin up millions of fake numbers and spoof the origin of the call. Quite honestly, there really isn’t a good way to authenticate who is on the other end of the line other than a series of painful security questions and even those are getting harder — my great aunt’s maiden name? There’s just got to be a better way…

While working on his PhD degree in 2009, Vijay Balasubramaniyan, had an unusual thought: could each phone call possibly have its own unique acoustic signature? Specifically, are there patterns in the sounds, packet loss and latency that could tell you the network, phone type and specific location the call was coming from? After some investigation, Vijay decided to focus his efforts on proving out the technology and the results became the core of his PhD thesis.

In 2011, Vijay completed his studies and hooked up with Paul Judge, a fellow Georgia Tech PhD alum and security industry veteran, to co-found Pindrop Security. The company’s technology is a commercialization of Vijay’s unique primary research and patents. Pindrop provides an enterprise solution that helps prevent phone-based fraud. Vijay’s pioneering acoustical fingerprinting technology detects fraudulent calls and authenticates legitimate callers, helping customers eliminate financial losses and reduce operational costs.

I’m very pleased to announce that Andreessen Horowitz will be leading Pindrop’s $11M Series A financing round. Our friends at Citi Ventures, will also be participating in the financing round. Here’s why we’re so excited to work with Vijay and Paul:

Founder/market fit. This is really our kind of opportunity — a very unique technology with virtually all the intellectual property invented by the founder. And it works! Vijay developed and patented the core technology while pursuing his doctorate at Georgia Tech, a school renowned for its cyber security and signal processing research.

Focus on voice fraud. As much as we talk about data overtaking voice — every customer we talk to has seen voice calls increase linearly with customers. And voice is becoming even more of an attractive alternative for fraudsters as the online channel is maturing and becoming more secure.

Very differentiated technology. It’s a very differentiated solution and the only one that isn’t purely fingerprint based so it detects zero-day attacks. Customers rave, “we are finding whole new fraud rings that had previously gone undetected…”

A track record of execution. Since we participated in Pindrop’s seed financing, Vijay and Paul have executed to plan in a remarkable way — they launched the product and had a stable of excited, apostle customers. The game film on their progress has been universally positive.

I’m super excited about joining Pindrop’s board of directors and look forward to helping Vijay and Paul bring this technology to everywhere people are answering phones and wondering who is on the other side of the line…

Ben Milne has a special relationship with transaction fees.

An entrepreneur with a design and manufacturing business in Iowa, Ben found himself obsessed with one simple notion: transaction fees were eating into his profit margins. If you consider money as data, there had to be a better way with so much money sloshing around in the system when the marginal cost of actually transferring the money is practically zero. So why did it cost him $55,000 a year to access it? Why then did he have to wait seven days to get paid?

This is the frustration out of which Dwolla was born. Ben set out to redesign a much better, and radically cheaper, payment network.

But how in the world would he scale a new, two-sided payment network today?

The PayPal and Visa stories are well documented. Visa’s story is famous. A genius by the name of Dee Hock pioneered a brilliant strategy that empowered a loose association of affiliates to distribute the card all over the world, almost entirely manually. And while eBay was distracted building and scaling their marketplace, PayPal snuck in to become the defacto standard for eBay transactions between individuals. eBay bought a competitor and tried to unseat PayPal but the network effects were just too strong and they ended up having to buy PayPal for $1.5B.

So how would Ben do it then? This is the beauty of his approach at Dwolla. Ben began designing a system based on the impending ubiquity of the Internet; something consumers, banks, businesses, and developers had immediate access to on their phones and computers. This would give Dwolla the ability to bypass the traditional systems, hardware, and distribution costs associated with the card networks birthed in the 60s and 70s.

Dwolla moves money for only 25 cents and can do so instantly (versus two to seven days it takes other processors). Signing up is free and there are no other costs. Not counting the hardware, gateways, and hidden fees, businesses and consumers were paying three to eight percent per swipe, adding up to over $48B in 2009. Ever walk into a bar, buy a drink and been told, “there’s a $10 minimum to use a card?” Yeah, that’s why.

What’s astounding? In addition to payments only costing 25 cents, transactions under $10 are free — this opens up a huge opportunity for Dwolla to be the defacto standard for micropayments. This “flat fee or free” pricing model strategy is such a compelling value proposition that large players, like the state of Iowa, are signing up for Dwolla in droves.

What about checks? Small business owners and consumers know the pain points associated with manually processing checks all too well and all the problems with the slow, antiquated Automatic Clearing House (ACH) network. How much does it cost to do a wire? $50? $10? That depends on where you bank. But either way, ouch.

These slow-moving, expensive, fraud proliferating systems aren’t just the United States’ burden. In many countries around the world, the luxury of ATMs, having cash on hand, or retaining the value of money as it moves from one person to the next, just isn’t possible. In many developing areas, networks charge up to 30 percent of a transaction because of the way you paid for a particular good or service.

The world needs a better way to transfer value, the same way it needed a better way to transfer information before the Internet went mainstream.

Now here are the other wonderful parts: Dwolla has created straightforward APIs, simple user experiences, social integration, and one of the United States’ most sophisticated and advanced banking software, called FiSync. And whenever Dwolla signs up a new customer, those users now send out their payments via Dwolla. The payee is then highly motivated to activate and bank-enable their Dwolla account to claim their cash. It’s natural convenience.

I am pleased to announce Andreessen Horowitz has led a $16.5 million investment in Dwolla to help Ben and his team realize their vision of fixing the worldwide payment network. Here’s why we believe this is such an amazing opportunity:

  • Founder/market fit: Ben is one of the most determined and scrappy entrepreneurs we’ve met and has a deep knowledge of the entire payment network.
  • Ridiculous market size: Dwolla’s FiSync is taking on ACH and FedWire, a combined $730+ trillion market with real-time transactions, new revenue streams and incentives for key players in the payment process.
  • A snowball of traction: Its annual processing run rate has moved from the hundreds of millions to billions and its business development pipeline is chock full of opportunities.
  • The simple strategy of “natural convenience.” Especially as it pertains to ACH and payout needs, Dwolla offers an easy-to-use platform for payers and a free, low-cost platform for payees.
  • Radical innovations in anti-fraud and risk management technologies: For example, Dwolla removes much of the sensitive financial information, which is often exposed when someone uses a paper check or plastic card, from its transactions. This reduces liability for merchants and developers, and mitigates the threat of identity fraud for its consumers. Genius.
  • One of a kind technology: Underneath Dwolla’s beautiful front facing experience belies a complicated, intricate series of systems, technologies, and considerations that we’ve never seen before.
  • Our customer references came back over-the-top positive on responsiveness, customer/ developer friendly, and intuitive/ easy to navigate user interface.

Ben and his team are introducing an entirely new way to think, access, and use money. I am excited to be joining Dwolla’s board of directors and look forward to helping Ben build the next multi-billion dollar payment company!

It is now clear that App.net (ADN) is not just a for fee twitter clone but a full on platform for developers to build a whole new set of services on top of.

With the announcement and launch of a free tier, ADN is following in the footsteps of Evernote, Dropbox, and Github in providing a well-worn business model. And the media, including Fast Company, Forbes, Quartz, TechCrunch, the Verge, VentureBeat, plus many more – are taking notice.

According to Forbes, “Caldwell is part of a larger trend that is trying to apply the way developers think about the digital world to products that can be easily used by non-technical consumers. These attempts buck the more general trend in the app-o-verse of insulating users from any direct contact with their own data or any sense of how much control they could actually exert upon it, given the slightest effort.”

Exactly right. ADN gives developers the ability to build innovative products and solutions that users love and gives users the ability to choose which social experience is best for themselves.

One of my favorite quotes from the coverage is from the Quartz piece: “While Twitter is trying to provide the social-media equivalent of a fully fitted bathroom, App.net’s could best be described as just the plumbing.”

We couldn’t agree more. Some people like marble bathrooms with jeweled faucets and others like a bare bones outdoor shower, but both need running water. Just like plumbing, your social graph is an incredible tool and we support ADN’s vision to let developers design countless “bathrooms” and let users choose what works best for them.

TechCrunch points to the importance of timing in making a critical move like this. Dalton has been very thoughtful about the impact of freemium on the ADN community. And wanted to build out the broader developer ecosystem before attracting a broader audience. The invitation system is a prudent way to open the doors slowly.

I want to congratulate the ADN team for the work and preparation behind this freemium launch – the coverage has been uniformly positive and the users are responding!

We are excited about the possibilities of this new platform and can’t wait to see what the developer community builds using the power of this new model. Sign up here for instant access or get a hold of an invite to check out freemium!

It took almost six months for my former company IronPort’s acquisition by Cisco to close and it seemed like forever. Although I was still the CEO by name, I was essentially running a “puppet” government with every hire, major expense and strategic shift needing explicit approval from my soon-to-be-overlords. Since Cisco was a functionally organized company, I would soon be losing half of my direct reports as sales, HR, and finance would report into their respective groups. My job was becoming smaller and it had considerably fewer degrees of freedom. So here was the big dilemma: I had signed up for 24 months of re-vesting my founder’s shares that wouldn’t begin until the deal was closed and it already seemed like a paint-drying eternity. I was pretty sure that I wasn’t cut out for a big company but I just couldn’t spend the next two years watching the clock or I’d spiral into insanity. What to do?

An analogy hit me as I watched my son at recent team practice: Water polo. Despite growing up on Florida beaches, I’m not that great of a swimmer. I’ve never even put on a Speedo. I didn’t think that I would like anything about water polo. However, if I was locked in a sports complex every day for two years and everyone else was playing water polo — how long could I sit on the edge of the pool before I gave it a go? Should I just go through the motions? Splash water on my face and feign participation? No, I came to believe there was only one way forward: shave all the hair off my body, put on the Speedo, start throwing elbows, making shots and playing with vigor…

Seriously and specifically, after six months in, I strongly advocated to be put in charge of all Security products at Cisco — a business that was three times larger than IronPort. I believe if the leaders of a newly acquired company are locked up for a significant period of time (>18 months), they should strongly advocate for bigger jobs within the acquiring company. This is especially true if the leader isn’t planning on staying around after the vesting period. This may seem like odd advice, but here’s the rationale:

It’s not about you, it’s about your team. If you’re a disaffected leader, moping around, “doing time” and talking smack, your team will disintegrate and the acquisition will fail. On the other hand, if you land a larger role, you are in a unique position to help them out. You owe it to the people who ate Ramen noodles while you paid them in potentially worthless stock to work at your company in the beginning. In addition to promoting some of them to larger roles within your new org, you will be much more connected to the cross-company opportunities and can advocate for your top performers. When your team sees you engaging, they are more likely to pull harder, too. Most of the mid-level managers at IronPort had a significant increase in their responsibilities at Cisco and it prepared them to take on even larger roles both in and outside the company. There is a myth that employees that come from a startup aren’t cut out for large companies — in fact, many may be ready for a change. Over the eight years we built IronPort, many of our single employees got married, had kids and wanted the current income, benefits, lighter work hours, and increased stability of a larger company.

You need to “sew in the organ” to make the acquisition successful. Most acquisitions fail. If something isn’t big enough to stand on it’s own or doesn’t logically snap into an existing business line, it will usually wither and die. This is especially true if the acquired leaders leave or become disaffected. Employees mimic leaders’ behavior or get shifted to new leaders when the previous ones exit and have no connection or trust with their new reporting chain. If the leaders take larger and different roles within the acquiring company they form beachheads of trust and points of navigation. It becomes less “them” vs. “us” and a more collective “we.” Look, I’m not saying it’s ever going to be Kumbaya over s’mores, but it’s a helluva lot easier to accept the bullshit you get at a large company if you have someone you trust explaining the rationale to you.

You will meet amazing great people as you get closer to the inner circle. If your head isn’t in the game, you’ll never spend any meaningful time with the best people. After my promotion, I got to spend a ton of time with the senior team, went through their version of VP leadership training, and tackled many tough strategic issues. I believe it’s only by really getting to know the key people that you can make an informed decision about making a career at the new company. Yes, I met my share of climbers, passive-aggressive assholes, and C-players but that didn’t really matter long term. The rockstars I came across have become lifelong colleagues — some of whom have stayed — but many have moved on to bigger, more interesting jobs in hot Silicon Valley companies. Don’t overlook the importance of this opportunity.

If you decided to take my advice and push for a larger role, I have a few more suggestions once you’re there:

Don’t play favorites with your old team. If you’ve run a successful startup, you’ve likely attracted first-rate talent to join you. Invariably, the close relationships, trust from working together, and familiarity with their great work will lead you to promote them first and fast. However, it’s important for them to earn some credibility with the new organization first. In retrospect, I moved too quickly and put my old team in charge too fast. We suffered from a perception of an “IronPort takeover” that was hard to reverse. I should have taken more time to evaluate my inherited Cisco team and let the cream of the crop rise naturally.

Mix up the talent. When we announced the reorg, I shuffled the leadership decks completely. The IronPort SVP of Engineering took over the firewall group and the Cisco VP running firewalls took over IronPort. Each had a fresh set of eyes and legs to apply to their new areas and attacked getting up to speed with vigor. In addition, we flew in all the director-level leaders and above from all the product groups to do group brainstorming and come up with new roadmaps for every product. Because the plans were argued and debated out in the open with everyone involved, there was much more buy-in with the employees working on the products.

Speak your mind. I was constantly pointing out inconsistencies, stupid directives, red tape, and anything that got in the way of doing the right thing. The fact that I wasn’t nursing a 10-year career trajectory and was on the fence about staying long term was incredibly freeing in terms of getting things done. In general, large companies get caught up in their processes so much that the leaders forget how to push to do the right thing. In addition to making the experience more entertaining, I met a bunch of other, like-minded leaders and made progress on important projects.

Negotiate for more compensation. Although this is starting to change at companies like Facebook and Google, most large companies are not prepared to be competitive with hot startups for compensating executives. As the leader, you can create a business case of what a comparable compensation plan would look like for a CEO of a private company. The main benefit here, again, is for your team versus you. If you can set up a compensation umbrella for you, it will apply directly to the rest of your executive team and top engineers.

Put together a succession plan. (Especially, if you’ve definitively decided it’s not for you.) In today’s world, 18-month stints are the norm at well-run large companies so there’s no need to feel bad leaving at the end of your vesting period. If you’ve integrated the team, someone would have likely distinguished his or herself and can be promoted into your role. If you’ve addressed your compensation and met all the best people, you’ll have all the data in place to make an informed decision to stay or move on.

In the end, for a variety of reasons, I left Cisco two years to the day when my vesting period was over. My former SVP of marketing at IronPort took over my role as head of all security products at Cisco. Many of the best people at IronPort stayed at Cisco for many years after their IronPort vesting was over. I believe the main reason the acquisition was a success was because the team engaged and meaningfully integrated into Cisco.

     “There are a bunch of aggressive, ivy-league educated, high IQ people working in Bentonville whose careers are going nowhere because they never learned how to connect with other people.” ­­­— Lee Scott, (now former) CEO of Walmart, circa 2008.

During my short tenure at Cisco, I attended a leadership offsite where Lee Scott was the featured speaker. I certainly knew of Walmart but had never heard of Lee Scott before this meeting. He humbly delivered a powerful hour-long speech on leadership ­­­— without notes or slides, as he paced the stage, hands in pockets. While I’ve heard a lot of leaders speak, I’ve never come away more impressed with how the delivery matched the content.

What struck me the most? That authenticity and humility lead to trust. Trust leads to approachability and open communications. And after listening to Lee for just an hour, he felt familiar and approachable.

Honest and fallible.

Lee definitely knew how to be authentic. For others, this may not come so easily.

At the core, coaching authenticity is complicated ­— some might say impossible. Telling someone to be authentic sounds pretty low calorie. Especially to a founder plowing through a list of product and operational goals. But it’s important. An approachable and authentic CEO is essential to fostering a high-performance, open communications culture.

About the clearest discussion I’ve seen on authenticity is a paragraph in Jack Welch’s book, “Winning”:

     “A person cannot make hard decisions, hold unpopular positions, or stand tall for what he believes unless he knows who he is and feels comfortable in his own skin. I am talking about self-confidence and conviction. These traits make a leader bold and decisive, which is absolutely critical in times where you must act quickly, often without complete information. Just as important, authenticity makes a leader likeable, for lack of a better word. Their realness comes across in the way they communicate and reach people on emotional level. Their words move them; their message touches something inside. When I was at GE, we would occasionally encounter a very successful executive who just could not be promoted to the next level. In the early days, we would struggle with our reasoning. The person demonstrated the right values and made the numbers, but usually his people did not connect with him. What was wrong? Finally, we figured out that these people always had a certain phoniness about them. They pretended to be something they were not ­­­— more in control, more upbeat, more savvy than they really were. They didn’t sweat. They didn’t cry. They squirmed in their own skin, playing a role of their own inventing. A leader in times of crisis can’t have an iota of fakeness in him. He has to know himself­­ ­— and like himself ­­­— so that he can be straight with the world, energize followers, and lead with the authority born of authenticity.”

He absolutely nails it.

The quote clearly illuminates the issue, though stops short of giving practical advice. I am often asked by founders and CEOs how to be more approachable or make a personal connection. And of course, while being authentic means something different to everyone — here are a few ways one could start:

Get self-aware. As I mentioned in a previous post (Treating the Dysfunctional CEO), all leaders need feedback. Having an understanding of how others perceive you — through a solid 360-review process — is the crucial first step towards being real. Learn and accept your foibles and faults. Poke fun and work on them out in the open. “I’ll try to keep this short, I know I can be long winded…” etc.

Talk about failures. Nothing helps make a leader more approachable than admitting your struggles, screw-ups and behind-the-scenes thinking on hard calls. If the leader makes this a priority, the whole company will be more open and methodical learning from failure. At IronPort, we used to go through exhaustive post-mortems: customer losses, engineering slips, and misplaced strategies.

Show up to socialize. Have a beer bust on Friday afternoons. Take a team to lunch. Drop in on a late-night networked video game war. (As a newbie, I was slaughtered pretty quickly). Especially if you are naturally an introvert, you must go out of your way to socialize with your team.

Embrace “professional intimacy.” I love this phrase. It describes a leader’s willingness to get personal and talk about life at home or their own career struggles. E.g. “My wife once threw my blackberry in the toilet… It’s essential to be able to balance home and work before it blows up.”

Nix multi-task listening. It’s one thing to ask someone what they are working on and another to really tune in, give them your full attention and ask follow up questions. I constantly see bad behavior with executives checking their watch or texts, or looking over a shoulder to see who else is in the room. That’s just phony crap.

Loosen up! This is really about speaking to others as though you really trust them with your thoughts vs. reverting to canned responses or the “company line.” Leaders that can explore the poles of an issue, in their own words and off the cuff with employees will gain real trust. This is especially true during all hands/company meetings.

Get good at speaking. As a CEO, if you are a nervous public speaker, you need to practice. Find a coach, do some videotaping and/or try Toastmasters. The goal is to have a marathoner’s heartbeat when speaking to a crowd so as to be natural and comfortable.

And finally: embrace different views.  Encourage employees to challenge your decisions and approach. Let everyone know that you are not perfect, you don’t always have the best answer, and sometimes they have better answers.  In some cases, you will get good ideas too. You are obviously the decision maker but embracing different views will improve openness. (Thanks to Yoram at Maxta for this suggestion!)

I leave you with two examples:

Alec Baldwin’s parody of a GE exec on “30 Rock” comes to mind. Yet for all that’s been said, good and bad, about GE…the company does actually have an enduring, high-performing culture for a reason.

And secondly, from what I understand, Herb Kelleher of Southwest Airlines, is the embodiment of an authentic leader. He would fly around and hold informal meetings with groups of employees that would yield all kinds of new innovations.

It’s leaders like Herb and the execs at GE, whom employees actually trust – that inspire ideas, pushback, and foster tremendous loyalty.