Through five acquisitions (buy-side and sell-side), coupled with nearly 20 years of working for/with early stage startups, I've seen a few patterns emerge.

For companies of less than 10 employees, buyers have gravitated towards simple, clear, emotionally compelling reasons to acquire. With clear rationale, a handful of formulas are then used to settle on price.

In all of my experiences, acquisitions have "felt right" for the CEOs, executives and boards pulling the trigger. There's been chemistry with the founders/team. The deals have been easily explainable. And the buyers have believed that the acquisition fills important holes in their business.

With buyers positively inclined, the negotiated price often is looked at in several ways.

1) Revenue Multiple: the starting point for acquisitions of startups is usually a multiple of annualized monthly revenue. So, if a company is at $50K per month in revenue, the acquirer would annualize to $600K. From there, I've seen 2x to 10x multiples, driven mostly by growth rates and compounded by other factors (company age, perceived attractiveness, clients/customers, location, etc.). 

2) Engineering Hours Multiple: although not a primary value driver, acquirers sometimes gauge IP value by a cost to reproduce formula. So, if a SaaS business has 10K hours of engineering time invested, the acquirer might put a $150/hour estimate on the 20K hours = $3M. From there, I've seen companies sometimes apply a discount, given learning time and various code changes along the way.

3) Team Value Multiple: in climates where competition for talent is fierce, and when a core team is viewed as healthy and committed, acquirers will look at the value per key team member. Engineers, product managers, sales leaders and one or two key operators all might be considered. From there, multiples can range from $250K/head to $1M/head (note that the high end has typically been applied more to senior engineering groups).

Of course, there are lots of other factors that acquirers consider (cash on hand, burn rate, market factors, etc.) when buying a small, early stage startup. And ultimately, price is simply a matter of what feels right to the individual buyer and seller. But when gut checks pass, approaches like the three above are useful in helping all parties feel like the deal is fair and rational.

Today, 20 startups affiliated with Capital Factory gave 3 minute pitches to a room full of potential investors. Here are 8 that caught my personal attention.

1) Authors: CEO Monica Landers highlighted how book publishing is broken and offered a compelling solution for writers, publishers and agents. 

​2) Pen Pal Schools: helping 70K+ students connect around the globe has turned Pen Pal Schools into an award-winning business for CEO Joe Troyen. 

3) ProHero: when CEO Mark Jackson (formerly one of John Elway's go-to-receivers at the Denver Broncos) told me I could book an experience with Tony Dorsett (yes, I'm aging myself), I was hooked. 

4) GoodyBag: I've been watching CEO Jay Panchal's office catering company for awhile and recently met him in person. I'm impressed by Jay and the potential for Goodybag.

5) Kandid.ly: CEO Sam Ulu has combined his aerospace brilliance, P&G experience, and personal history into a compelling service to help us source photographers for more of life's important events.

6) Music Meets Video: with a wonderfully addictive approach to tallying votes for American Idol style performances, CEO Alex Mitchell's destination is seeing impressive growth.

7) PopUp Play: as a father of three, I especially enjoyed CEO Bryan Thomas's modern twist on building a castle.

8) ROIKOI: hidden under a serious surfer's exterior is the creative brain of CEO Andy Wolfe. And with ROIKOI, he's figured out a compelling way to help companies identify and recruit serious talent -- via passive employee referrals.

Kudos as well to all of the companies that demo'd today: Chiron Health (reimbursable video visits for physician practices), Cloud9 (mobile patient engagement), Curb (home energy monitoring), md Portal (telemedicine services), PreSchool2Me (childcare connection technology), Rent Rebate (Redfin for Apartments), SchooLinks (international education connections), Social Matterz (social media lead sourcing), Tastebud (dynamic pricing for food/beverages industry), ThinkVoting (a new way to mobilize citizens), TripChapmp (nextgen corporate travel) and YouRoam (free calls and texts to your phone over WiFi).

Overall, the day was polished, energizing and impressive. Thanks to everyone at Capital Factory and to all of the entrepreneurs who presented. Your hard work was evident and you all helped demonstrate why Austin has become the startup capital of the world (see: Kauffman Foundation).

* Disclosure: I am an advisor to Authors and a Partner at Capital Factory.

Recently, I've read six books that have impacted my thinking and spirit -- and feel aligned with my overall quest for Growth (along multiple dimensions). 

Here's the list and why I'd recommend them:

On Kindness by Adam Phillips and Barbara Taylor.  This compact, 114 page exploration of the history and philosophy of kindness packs a punch. I especially found the authors' perspectives on Enlightenment-era debates by Hobbes vs Rousseau, Hume, Smith and others to be fascinating. The Freudian sections dragged on from my perspective and can be skipped. This fundamentally optimistic book is perfect for a flight -- especially if you're coming from or going to meetings in larger cities where not everyone outwardly and consistently projects kindness!

The Art of Stillness by Pico Iyer. I loved this book. Like "On Kindness," it's a quick read (even shorter at 66 pages). You might even be tempted to finish it on the airport tarmac before your ascent. But what it lacks in length, it makes up for in riches via a call to the quiet life. Iyer, an acclaimed journalist and constant traveler, simply and beautifully describes the benefits of silence and aloneness. Whether via short retreats or quick walks, he encourages us to slow down at times in a way that feels refreshing, energizing and achievable.

The World's Great Thinkers: Man and Man, the Social Philosophers.  Originally printed in 1947 and part of a four part set, I found this gem on my late father's book shelf. As a public school kid from Upstate NY, and a management undergrad major at a State university, I missed a classics education. If you're like me, or are looking for a brush-up, this wonderfully edited piece includes important slices of Aristotle, Plato, Epicurus, Marcus Aurelius, Epictetus, Emerson and others -- coupled with historically grounding editorial introductions. You may have to hunt a bit for the now out of print set but it's well worth the search. 

Wind, Sand and Stars by Antoine de Saint-Exupery. Like many, I originally discovered de Saint-Exupery as the author of "The Little Prince." What I didn't know was that he was one of the original French aviators. This National Book Award winner, recipient of the Grand Prix of the Academie Francaise, and National Geographic Top Ten Adventure Book of All Time is soaring and majestic. The translated prose captures the spirit of humanity via first-hand accounts of the dangers and gifts of early air travel.  Riveting history and thought-provoking explorations abound.

Reinventing Organizations by Frederic Laloux (forward by Ken Wilber). While I've yet to finish this overview on a new way to create business structures, I've deeply appreciated what I have read. In 2014, Laloux quietly published a book that has had rippling impact (see the Amazon reviews, for instance). In it, he looks at the evolution of organizational structures that parallel our evolution of consciousness. And he argues that we're at the forefront of a major shift that can be seen today in select organizations. Full of concrete case studies and examples, Laloux's work to build upon Wilber's theories is important for those of who study and lead organizations. This has become a book that I'm keeping close at hand as I challenge myself to fully digest its essence. The Foreword and first couple of chapters are already dog eared and reread in my copy!

Brain Maker by David Perlmutter. I was first introduced to Dr. Perlmutter via his exploration of the evolution of wheat, increase in inflammatory states, and link to brain diseases in the important book "Grain Brain." In his latest piece, Perlmutter explores how our gut microbes (our "microbiome") impact our health. Once again, his research seems sound, his writing is clear, and his topic important for our ability to lead and serve with health and vigor. 

In closing, the above clearly aren't a typical set of business books for entrepreneurial executives. That's definitely by design. In my experience, the journey of business is one where our whole, authentic selves can be drawn in. These books have helped me discover and explore new boundaries, thinking and frameworks. I'm hopeful that they are enjoyable, challenging and enlightening for you as they have been for me.  

Idea in a nutshell: 100% of unscientific survey respondents indicate that great teams are a major factor in fueling energized work. 

About a month ago, I posted a variety of loose thoughts on what I've been calling Energized Working. In a nutshell, I offered that Energized Working was different from Flow, that it required an amalgamation of aligned elements, that it had the potential to operate over an elongated time horizon, that focus and optimism often seemed to be at play, and that I was just starting to scratch the surface on my exploratory work.

Last week, I pushed forward a bit and leaned on my friends for perspectives. Picking 35 folks in a very unscientific way, I asked two questions: 1) How would you rate your current work/professional energy? and 2) What factors contributed most when you last felt most energized at work?

The results were interesting -- to say the least!

First, ~2/3 of those asked actually answered the survey. This shocked me as typically surveys I've conducted have gotten less than 50% response rates. Way less. I optimistically looked at this as an indicator that people were interested. And several of the comments I've gotten since further demonstrate interest in the topic. Maybe we're on to something here. Thank you deeply to everyone who took the time to respond!

Second, my friends are feeling better than I would have imagined. While ~8% indicated their energy was relatively low, ~60% said that it was pretty good. And a full ~32% (nearly one in three) said their energy was excellent. Wow. I didn't expect such good energy (but again, since this was an unscientific survey there are likely all kinds of biases and skews at play here).

Third, the ranking and focus on energizing factors was intriguing. Per below, 100% of respondents indicated that a great team was a primary factor in contributing to the last time they felt energized at work. Amazing, right? I can't think of the last time 100% of my friends agreed on anything!

Some items that I personally expected to be higher in the survey, weren't. For example, only 40% of respondents indicated that meaningful work relationships were major energizing factors. And a great boss? Only 44% felt significantly energized via their boss (sorry to my managerial readers).

While the survey was intentionally skewed towards motivating factors, hygienic elements were included as I was curious to see how people would respond (for deeper perspectives, see Herzberg's motivator-hygiene, or two-factor, theory). And via conscious intention or not, work hygiene factors like compensation (30%) and a commute (9%) found their way to the bottom of the list. 

In other words, minimal dissatisfiers don't produce energy.

Here's the full set of responses:



















What do you think? Did I skew the survey too much via who we selected and/or the choices I provided? Do these results seem aligned with what you might expect? Is this whole Energized Working thing something new...or are we just backing our way into yet another test of happiness or flow, subjects well covered elsewhere?

As always, I'd love your feedback, via either a comment below or to steve at alder dot vc via email. 

And until next time, I hope that your energy is high and your hygienic dissatisfiers low!

Idea in brief: when pursuing Series A rounds during the fall of 2015 in/from Austin, consider four key points.

As summer 2015 creeps to a close, several recently seeded companies are getting ready to pursue their first significant Series A institutional investment round.  Things have changed dramatically in the 18 years I've lived in Austin and have been part of three Series A+ backed companies (ichat, Motive, Pluck). And the landscape for Series A raises is very different from the days when many folks pursued a bit of an "Austin Ventures and everyone else" strategy. 

Yesterday (July 19, 2015), Semil Shah published an excellent post on Series A raise guidance in general. I wholeheartedly agree with his perspectives on timing initiation (September), precision (targets), vision (big), teams and more. If you haven't already read it, check it out here. 

While Shah's take holds true broadly, there are also a few Austin specifics that are worth drawing attention to and considering, especially for SaaS/enterprise software firms getting ready to raise. These include:

Hit Your MRR Cliff: while not a hard and fast rule (and sometimes addressable via high growth), $100K+ in current MRR along with a clear pathway to $1M+ in MRR is often tablestakes for Series A dialogues. If you're not at least at $100K MRR yet, make sure you understand the competition you'll have for investors' deal cycles.

Consider Starting Outside of Austin: while my local institutional friends would prefer an alternative path (see below for my shout outs to them), I've seen several examples of Austin companies that bring in a lead investor from outside of town (and then often line up a local partner for a club/group deal). Examples of great non-Austin based Series A investors who have invested in town include:
* Mike Maples, Floodgate
* Anthony Lee, Altos Ventures
* Jeff Hinck, Rally Ventures
* Blair Garrou, Mercury Fund
* Seth Levine, Foundry Group
Note that the list above is non-exhaustive and is based on personal and friends' experiences. There are certainly other significant firms that are active in Austin, including Battery Ventures, Charles River, and Mohr Davidow. And doubly note that raising money in Silicon Valley is arguably harder in many ways than raising elsewhere, including Austin. But that might be a good topic for another post!

Ponder Medium-Sized Austin Funds: maybe not surprisingly, my primary list above is mainly made up of $100M - $200M funds. In my experience, many funds look to return 20% of the fund (reasonably) with each investment. So, a $100M fund that makes a $4M Series A bet can look at a 5x return without requiring a public offering (for simple math, a 20% position in a $100M acquisition can reasonably drive 5x on $4M (=$20M = 20%); of course funds would like 10x+ returns but 5x in a reasonable time period is generally viewed favorably in my experience). On the contrary, $1B+ funds sometimes struggle with the need to return $200M per investment (10x the formula above). Accordingly, three compelling Austin Series A-oriented investors (in my experience) are:
* Krishna Srinivassan, LiveOak
* Morgan Flager, Silverton
* Jason Seats, Techstars
Note that while Jason is in Austin, Techstars is technically a distributed fund with partners in Boise and Boulder. Other notable Austin funds generally tend to be seed oriented (e.g. ATX Seed) or Series B+ focused (S3, Vista, etc.). Several Austin Ventures partners have been great friends to startup teams historically and may be in a position to help as their partnership continues to morph. Don't rule them out.

Have Your Support Network Ready: as Austin SaaS/enterprise software is still a pretty small community, having influential folks in your camp really helps during due diligence (i.e. back channeling). Executives who know your business (advisors, angel investors, etc.) and who have produced hits via portfolio companies like Vignette, Tivoli, Motive, Pluck, BlackLocus, Bazaarvoice, HomeAway, Waveset, Convio, Adometry, SolarWinds, and RetailMeNot are key for startup teams. 

Of course, there are lots of nuances around your pitch desk (Kip McClanahan of Silverton has a 2012 series of tips that still hold true here) , ham-and-egging your approach, pondering a single investor versus a club/group round, determining valuations, and navigating the myriad of complexities inherent in term sheets. But if you can start with a wise approach, and find your way through good execution + a little luck on the four points above, you are well on your way.

One final point: there are lots of people (myself included) who are absolutely inclined to "root local" and who love to see Austin companies raise capital from great partners. So, lean on us to help!

Idea In Brief: Finding the zone of Energized Working facilitates profound flourishing and significant accomplishments. This initial post is a proverbial toe dip in the waters of conceptual exploration.


Over the last three decades, I've been fascinated by how personal energy impacts work. And as I glance at my bookshelf, I'm not alone: The Living Company, Flow, The Advantage, Flourish, Jamming, The Art of Happiness, Linchpin, Built to Last, Blink, Drive, Unstuck and more are titles that directly or indirectly look at how energy influences our work. 

McKinsey also conducted research in the early 2000s around organizational energy in times of transformation. Not surprisingly, 57% of executives involved in successful transformative efforts felt that their companies had maintained positive energy.

Based on my often limited personal energy (e.g. I tend to function best with ~9 hours of sleep per night), motivated by a variety of challenging autoimmune diseases in my family, and influenced by books like those above, I've become even more curious about personal energy, especially as applied to how we spend the majority of our time -- our work. 

I also had a moment of illumination recently, brought about by a gift from my good friend Bo Durickovic. As we were literally "going to the mountain" (hiking Mt Humphreys in Flagstaff, AZ) and talking about life, nature, business, entrepreneurship and more, he stopped me on the trail and said something like, "Dude, you're the energy guy. Why don't you do something with it?"

Simple words, but like most profound challenges they left me stumped. What should I do? Is there a product here? A new take on research? A gift I can bring to the world? A book? A talk? What is it and does anyone care?

Further, what do we really mean when we use loose terms like "good energy" or phrases like "I'm feeling energized?" 

As I started digging in more, I felt even more convinced that I needed to better understand how we build positive personal energy that can both fuel great individual work and ripple through those we serve. And I felt compelled to start a journey of research, meditation, reflection and writing to provide perspectives that might help others.

This blog post is my first attempt to inch towards Bo's challenge. I think there's a bunch more here and I'd love to hear from you. Is energy something that you think about? How do you build and maintain your personal energy? Is too much energy a bad thing? How might darker forms of energy (e.g. like anger and anxiety) actually serve us in certain times? 

There are so many questions that I'm playing with and I'd love to glean any of your thoughts via a Comment below or an email (steve at alder dot vc).

To begin, I'll initiate the conversation with a set of incomplete perspectives on Energized Working. I view these as an initial attempt to put some initial thoughts on paper. Please bear with me.

What is Energized Working?
While I love the state of Flow, I often find that by its very definition it's not maintainable over extended clock nor calendar time periods. Energized Working, at its best, keeps us going over extended periods. 

In a nutshell, I'd offer that Energized Working is the intersection of Focus and Optimism.

Specifically, when we're focused on something clear and meaningful, and we're optimistic about the outcome, we have the potential for Energized Working. But in my experience, there's more that's required.

Physical Needs
Energized Working requires a highly tuned vessel for delivery. The body generally needs to be in good working condition to enable Energized Working. Factors that influence my physical state (and these are generally somewhat different for everyone) include sleep, moderate caffeine, aerobic exercise, anaerobic exercise, moderate alcohol, nutrition and more. As I start to gain more data on how others experience Energized Working I'll look to share more about physical priorities -- and techniques around long term, reasonable enablement.

Psychological Needs
While our physical requirements can be high, our psychological needs are arguably higher. In my experience, I need to feel grounded, appreciated, innovative, sharp, articulate, creative, included, visionary, productive, committed and more. I'm hoping through both secondary and primary research to better understand the collection of feelings, emotions and nudges that equip us to engage in energized work. 

Work Needs
While our bodies and psyches have requirements, the work itself generally also has a set of conditions that give us the best opportunity to find and maintain energy. For me, purpose is paramount. There needs to be meaning in the cause itself. Second, impact must be big -- either dramatically changing a few people or moderately helping huge audiences. Third, I find that the new trumps the routine; innovation and creativity build energy. Finally, results matter. The work needs to win and grow in measurable ways (typically through revenue as a market indicates their value in the work by paying for it).

Moving Forward
Per above, this post is meant to start to scratch the surface. By intent, it's incomplete, scattered and high-level. Accordingly, I genuinely appreciate you for bearing with me as I start to publicly play with concepts, learn on the fly, and work to bring you something of deeper value. If you're still with me, and if Energized Working is of interest to you, please do let me know! 

Idea in Brief: marketing and integration software partnerships are often hard to quantify. Tracking and measuring revenue influenced is a viable solution.

As software firms grow, partnerships become more and more important (see posts Categorized as Inorganic Growth for other perspectives). But as CEOs and boards invest in alliances, partnership marketing, leveraged sales and more, the question is often: how do we measure success?

In my experience, both as a former alliances/business development functional leader, as well as across a myriad of advisory and investor positions, influenced revenue can be the magic metric. 

So what is influenced revenue? Simply put, it's revenue that was initiated and/or accelerated by partnership efforts. Examples include:
* A friendly account executive calls with a tip on a prospect.
* A services lead endorses a partner solution within an account.
* A product manager highlights an integration in a roadmap session.
* A solutions consultant coaches a partner sales person on how to navigate a tricky account.

In all cases, one can see how decisive, thoughtful action, accompanied by a sharing of the activity adds value. Generally, business development managers should be tasked with provoking, soliciting, tracking and positively rewarding influence behaviors.

And for enterprise software, pursuing ~25% of deals via partner influence has been about the right level. Note that influence requires significant communication, positive experience, product education and trust on both sides of the equation. But the steps to build to it are well worth it, especially in large deals with complex selling environments.  

Idea in Brief: For B2B software companies, an intelligently crafted partnership strategy can often be the best pathway to a premium acquisition.


The old adage of "companies aren't sold, they're bought" has played out numerous times in my personal experience, both as an operator as well as an advisor and investor. For example, when we sold Pluck to Demand Media we were in hyper-growth mode and weren't looking to be acquired. Yet the team, capitalization, deal structure and growth opportunity with Demand Media made an early company sale an easy decision.

Behind the scenes, what happened with Demand Media and Pluck was that we first began a business development conversation. Pluck owned a product (BlogBurst) and Demand Media became interested in our technology and content partnerships. As we engaged in reseller/OEM conversations, it became clear that an outright acquisition made sense for both companies. 

While acquisitions often have an element of serendipity (and the Pluck deal certainly felt blessed by luck at times), an intentional business development strategy can often be the best pathway to a downstream corporate development opportunity. 

So, how do you approach things? Below are a variety of tips and best practices.

C + BD = W. Strategic partnerships absolutely need to be sponsored, directed and led by the CEO (C). But the possible selling company should have a business development (BD) leader (early on, this can be the VP, Sales) who is clearly focused on escalating partnerships through stages that can lead to an acquisition win (W).

Bet Big. While your company should work opportunistically with a myriad of organizations in your ecosystem, a single, big/bold bet can enable disproportionately positive returns. For example, BuildForge, a build process management software firm,  realized early on that IBM was the right company to buy them. Accordingly, they developed a tight and unique partnership with IBM that fostered information exchange and trust.

Start Small. A mistake that early stage software companies often make is that they skip steps in the partnership evolution process, forgetting to start small and grow. While things aren't always 100% consistent and linear, the steps that often occur are:
- Integration: a startup invests resources to read and/or write to an API provided by big company.
- Marketing: the startup then spends money touting the integration (advertising, social media, white papers, collateral, webinars, customer events, lunch and learns, etc.). 
- Sales: with a proven integration and awareness growing (along with at least a handful of joint customers), a savvy startup will move to developing sales relationships with the big company's account executives. While the AEs won't initially earn commissions via direct sales by the startup, the smart ones will want to be educated and knowledgeable.  They'll both want to offer perspectives to their customers and be aware of deals happening within their accounts.
- Channel: with integration, marketing and sales humming, the business development team at the startup, with CEO and product team involvement, can begin to pursue a reseller (non-branded) or OEM (white label) channel relationship. In my experience (e.g. with Motive and eventual acquirer Alcatel), these partnerships require multiple layers of effort (product, technology, sales, BD, C-suite, etc.) and a high degree of commitment and sophistication to drive forward.  

Build Trust and Show Value. With a channel partnership in place, the startup has a strong reason to invest in the enablement and success of the big company. Daily emails/activities, weekly update calls, quarterly onsite business reviews and more enable teams to get to know one another. Often, the startup will even want to tee-up and/or push over, deals. Overall, it will be important to set mutual targets and then work maniacally to overachieve, demonstrating the trustability, like-ability and revenue potential of your company.

Dance the Dance. At some point, ideally with the big company seeing significant revenue (and growth) from the startup, a conversation about a strategic financing event can organically occur. In many cases, I've seen these happen over nice dinners between CEOs. The startup may be ready to pursue Series C financing and asks the big company executive if they might recommend a new lead institutional investor. From there, the logical question is often, "what if we invested?" And from there, the strategic partnership model often can find its way to an outright acquisition conversation. 

The model above is a fairly simplistic overview on what can often be a multi-year, complex, circuitous path. But if finding a major home for your startup, and a solid return for your investors and employees is a goal of yours, starting the business development to corporate development journey is well worth it. 

Updated 7/3/15. Something happened for me earlier in 2015: Google Hangouts reached a tipping point in my work life. A catalyst was a client who defaults their distributed meetings to Hangouts. But there was something more in play for me. Hangouts started to work. Really work.

Previously, I found starting, maintaining and using Hangouts to be hard and unpredictable. Voice quality would erode. My pretty modern MacBook Air wouldn't relay the microphone to Hangouts. Video would freeze. Overall, others' invitations to Hangouts caused me to produce palpable groans.

But things kept getting better. And suddenly, there I was, gleefully video conferencing with folks in New York, California, London, Estonia. And it was a good experience!

Now, I have learned a few things through Hangouts failures. So here's what I'd recommend as you embark on Hangouts adventures:


* Leverage Google Calendar's Automated Video Call Setup. It's much easier to get everyone into a Hangout via the meeting item. But watch out: iOS and other calendars don't always pull the link into the meeting invitation so it's a good idea to include the URL in the body of the invite if you have non-Google Calendar folks.

* Switch Accounts When Entering. This took me a number of months to figure out. I use multiple Gmail accounts and Chrome. When I'm invited to a Hangout using my non-primary Gmail account, I often can't enter the Hangout. I've found that if I "Switch Accounts" (small link at the footer as you enter the Hangout) and use my primary Gmail account (e.g. the default in Chrome) I don't have problems.

* Have a Conference Call Backup. Services like FreeConferenceCall, although choppy and sometimes blocked via corporate phone systems, offer an option. We've had issues where voice quality degrades but video is ok. We've also had microphone recognition problems, per above. In either case, we mute everyone in the Hangout (keeping the video going) and fire up a traditional phone bridge. And surprisingly, lip/audio sync has been pretty good.

* Drop Video if Needed. Contrary to the voice problems above, sometimes video freezes and or puts a tax on packet transmission as a whole. If everything is choppy, and you've closed your tabs (see below), try turning off video for a bit in the Hangout and using audio for awhile. Similar strategy holds if you're sharing documents in the Hangout (you may need to close desktop sharing for a bit).

* Close Some Chrome Tabs. This is anecdotal, but I find that if I have a bunch of tabs open in Google Chrome (especially with semi-connected apps like Sheets) my Hangout quality becomes suspect. 5 or less tabs generally seems to be ok, but this is also dependent upon the quality of my network connection (e.g. shared wi-fi in a crowded cafe makes Hangouts hard regardless).

Hoping this helps you jump in as Hangouts become a very real business tool. As always, Comments (including other tips on how you've used Hangouts) are appreciated!