Product Discovery 101

As an entrepreneur, how confident are you that you fully understand your customer’s pain points and/or job to be done? When I first meet an entrepreneur, they tend to start selling me on their solution before explaining the problem they are trying to solve. I typically see or hear little evidence that they’ve done true discovery work to validate the problem or their target customers. While gut feel or personal experience with the problem can be a strong signal there’s a problem to solve, without proper product discovery work, you won’t truly know if you have a winning solution.

For those that profess they have done proper discovery work and have validated the problem, but don’t yet have a product, my follow-on question is “How do you know people or companies will use your product?”. More often than not, I get examples of interest tests such as hits on social media posts or answers to surveys that are so biased it’s hard to trust the results. Further, they may have a good hunch there’s a job to be done that needs improving/replacing, but they cannot describe where in the customer journey they can truly make an impact.

I’m a big fan of confident founders who are passionate about their idea, but a little humility and a lot of discovery work can determine whether there’s a winning solution and save a lot of time and money wasted on building the wrong thing. If fundraising is also a consideration, being able to have real data vs. gut feelings and biased test results can be the difference between a modest angel round and a strongly led seed- or A-round.

To that end, a few tips…

Interest vs. Problem Testing

“We had 1000 clicks on our Facebook ad in the first 48 hours”,
“Our conversion rate from click to sign-up was 50%”, OR
“We interviewed a bunch of people and they said they’d use our product if we built it”

When I hear these types of quotes early on in a product’s lifecycle, I do a mental facepalm. These quotes suggest they may have found an audience interested enough to click on an ad and to give their email addresses, but they still have not proven anything about the actual usefulness of their product or that it solves a real pain point for their target customer that they are willing to pay for to fix. These tests are OK to do, but should not be the only way you validate problems to solve. If you plan to do interest tests, consider these approaches:

  • Social Media: Great for finding your audience, should be done on multiple platforms and carefully crafted so as to answer only 1–2 hypotheses. These hypotheses are commonly “Is this where our audience is if we want to market to them at some point?” and “Are they interested enough to click and learn more”. These tests can be expensive so be thoughtful about where and when to do them (e.g., if you’re building a product for teens, test on Instagram or Snapchat where they are (vs. Facebook)
  • Landing Pages: The best way to capture interest, email and demographic data. If they found you through social media tests or googling,
    a) you’ve proven they were interested enough to learn more,
    b) that your SEO works and they found you; and/or
    c) that they trust you or care enough about the problem you wish to solve that they will give you insight into who they are.
    These future customers are great targets for problem testing and could be your early adopters. Be careful though, early adopters are great for testing, but don’t always guarantee a chasm-crossing to the mainstream. This too must be validated.
  • Surveys: Surveys are very hard to do right and often capture a lot of random and very subjective information instead of getting real data to inform your product. We have this tendency to think “while we have them, let’s ask them everything!”. Great surveys are:
    • Ten questions or less,
    • reflective in nature (Ex: how many times did you buy “X” in the last month?) and very data-centric (Ex: how often do you order takeout for dinner?). Reflective questions should have ranges to choose from that do not sway the prospect or suggest there’s a right answer; and
    • capture basic demographic information only relevant to the questions at hand (e.g., don’t ask age or gender or income unless that’s specifically something you need to know about your audience); as long as you have contact information, you can always follow up for more demographic data if needed.

More important than interest tests early on, are tests that validate there is a problem worth solving and where exactly a product can be most successful in solving that problem. Validating hypotheses about the problem through a variety of methods is going to lead to a far better outcome than clicks on a Facebook ad. The more ways you can learn about your target customer and discover where the problems are, the more likely you’ll get on the right path to solution building. This process takes multiple iterations and approaches to get to a minimum viable product (MVP) that begins to address the issue.

Consider trying these different types of problem validation tests in your discovery process:

  • Interviews: Similar to surveys, interviews are as much an art as they are science. It is incredibly easy to lead a witness, bias answers and hear what we want to hear in an interview. The best guide for conducting a proper discovery interview is Rob Fitzpatrick’s book “The Mom Test”, which I encourage every entrepreneur and product manager I work with to read. A few key takeaways:
    • PRIORITY: Talk with strangers! Any interview subject who is a friend, family member or member of an affinity group (e.g., student/alumni at your school), you bias the conversation. They are more likely to tell you what you want to hear and validate your idea vs. truly objective answers. If you’re not comfortable talking with strangers, don’t interview or hire an independent consultant/friend to do it for you.
    • Write a script and be clear about what hypotheses you are trying to validate before the interview. Sticking to a script ensures a clean comparison of results after interviews.
    • Start by setting the stage. You are learning from them vs. selling them on your idea, no answer is a wrong one and set a time expectation — 30–45 minutes are ideal. Always end by thanking them, asking if you can follow up AND if there’s anyone else they suggest you speak with about the topic.
    • Always ask open ended questions — Ex, tell me the last time you…
    • Always have someone serve as observer & notetaker not just to capture what’s being said, but to look for body language, expressions and any other “tells” about the problem you are trying to learn about.
    • Do more listening than talking — you’re there to learn from them, not sell to them.
    • Unsure what they were explaining or want to reframe their response into hard data? Echo it back and see where that leads them. Ex: “So what you said is, you usually eat out twice a week?”.
    • Always record the session — most interviewees will not mind being audio or video recorded (the latter is better), especially if you assure them it won’t be shared outside of your team.
  • Ethnography: Observing prospects performing the job you hope to improve/replace can be extremely insightful. You may see hacks they would never tell you about in an interview or discover there’s a whole new set of problems in their process that you had no idea existed.
  • Emotional journaling or mapping: Having a prospect journal or map out their process and highlight how they feel along the way can pin-point exactly where they are most frustrated in their process. This is also a great technique if you cannot observe the prospect in the setting where the problem exists. Ask them to journal or map and send you something within a set period of time.
  • Journey mapping: Bringing together all your discovery work to identify where you found patterns of highs and lows. These may surprise you; often where we hypothesized there was the most pain in a process may be somewhere completely different.
  • (Don’t do) Focus Groups: I am generally not a fan of this form of discovery. It lends itself to group think and can lead to false results. Focus groups can be useful later in the product cycle when you want to get reactions to branding or observe groups of people using your product if it’s a tangible item.

Prototype Testing
The best way to validate a problem exists is to actually insert yourself into the process and learn by doing. These tests lean towards solution building, but the idea is you’re doing tests without building anything or building very little to get clarity on the problem and the customer. The most common forms of these tests are:

  • Lo-Fidelity Concierge Testing: Jump right in and assume part of the role that your product might fill in the future. If you were coming up with a new restaurant reservation system, this may involve a phone conversation with the party needing a reservation and having you do the actual booking for them and perhaps texting them to confirm their reservation. By being the intermediary, you are fully embedded in the process to understand all sides of the problem. The key to success of these early tests is to resist the temptation to correct your customer or other players and just go with whatever they do to experience the process. You can tweak things as you learn more about what works and what doesn’t work along the way.
  • Wizard of Oz (WoZ) Testing: Unlike a concierge test which is transparent and prospective customers are aware you are part of the solution, a WoZ test allows you to intervene without a customer knowing you’re doing work behind the scenes. This is usually created by having a prototype of some sort that the user interfaces with, but involves manual labor that users don’t see. For example, In the early days of Uber, a dispatch team was used to direct drivers to pick up customers and text customers about arrival times before they had complex algorithms and a driver app.
  • Physical Prototypes or Competitive analogs: If you are building something non-digital that could be expensive to manufacture before you test, there are several creative ways to do discovery early on.
  • Prototypes: Small runs of your future product or handcrafted using freelancers to do 3D printing, sewing or even a pop-up restaurant are ways to get your idea concept tested and feedback on its use before spending too much money. One of my favorite examples of these is a former student’s idea for a smoothie making machine for offices. Before he even made the machine, he started making smoothies in offices just to see what employees liked, how visual aids helped (having fresh fruit nearby inferring a fresh product) or offering add-ins like chia seeds or protein powder to see if they made his smoothies more appealing. Not only did he learn what flavors were most popular to focus his MVP, but he also got a lot of insight into the operations of small to medium sized businesses, how much of a footprint he’d need for machines, maintenance requirements, etc. It was an invaluable experience for this entrepreneur.

Smoodi team testing mix-ins with their early prototypes

  • Competitive analogs: Having target customers use other, similar, products can be as telling as using the product you hope to create. Using a tool like UserTesting to have a prospect walk through their use of a current competitive product can be very insightful. Having target customers use a competitive product for a week or two can also be insightful. Just be careful not to start creating your product based on what these other products have/don’t have. The goal is to understand how these prospects interact with those products today — it’s not to get feature parity.
  • Expert Testing: Sometimes, you are working in an area where you may not be an expert, but you have a hunch it’s a white space ripe for disruption. If you don’t have access to the experts or their customers, find or create a space for them to connect and observe through their experiences. This could be as simple as finding them on Quora or Reddit and looking at threads of questions that are related to what you’re exploring. You could create a forum for them to chat if none exists (e.g., an affinity group Slack workspace or Meetup) or even create an event to gather the right people. Another one of my former students got her start with ElektraLabs by creating an event which not only informed much of the early product, but also connected her with experts who went on to both advise her company and evangelize her product.

A Few More Best Practices
All of the above tests should be explored whenever you are in the process of validating problems and target customers. Try many and do them often. Testing never stops! Here are a few more things to consider when designing your tests:

  • Eliminate Bias: I can’t emphasize enough how important it is to have as objective a test as possible. This means not asking your friends, co-workers or parents to participate. Find total strangers who can give you honest and authentic feedback.
  • The Rule of 5: If you keep your criteria very tight — who you are asking and very specific things you are testing — you need not do more than five tests before you know where you are trending. But limit your variables per test (see next bullet).
  • Limiting Variables: The Rule of 5 only works if every test you do is limited to a couple of key questions you want answered. The more variables in a test, the harder it will be to discern what influenced an outcome. For example, if you are trying to test whether women ages 18–20 vs. women 30–35 have a problem finding a great yoga class, design a test that is the same in every way, just test it with five of each of these two different audiences. Similarly, limit variables in prototype tests such as in the smoothie test noted above, where when the founder tested add-ins at one particular site, that was the only variable he changed; all other aspects of the test remained the same including the site itself.
  • Breadth of Demographics: You may be designing a product that you believe everyone in the world will need OR that you believe only one target audience needs. Gender, income level, geography, etc. may or may not have an impact on adoption but you won’t know that until you parse things out early on and test a few. How a 13 year-old uses a product may be completely different than a 45 year-old (Facebook is a great example of this). Also, if you don’t test different demographics, you may miss an audience that could be in most need of your product.
  • Measured Outcomes: Start with a hypothesis of what will happen per test, ideally in measurable outcomes such as % of people who accept a restaurant recommendation or number of smoothie customers who want an add-in vs. those who do not. Decide what you think success looks like for these tests. If your outcomes vary, then consider whether your test was valid and/or whether the learning lends itself to further testing or abandonment of an idea. In the case of the smoothie, the founder hypothesized that his target customer would want 5–6 flavor combinations, but found only 2–3 flavor combinations were most popular, thus he limited the flavor options in his MVP.
  • Leverage Existing Technology: Finally, in today’s highly tech enabled world there are a number of ways to engage your target customers using what’s already out there to your advantage before building anything yourself:
    • Typeforms, google forms, etc. can capture form data
    • Online payments can be simulated using Venmo
    • Texting can simulate alerts and notifications
    • High fidelity web prototypes from Figma, Sketch, Invision, etc.
    • 3D printed mockups & scrappy hand crafted prototypes made from supplies you can buy online

Another former student of mine with a software engineering background resisted the temptation to code a solution and instead created a WoZ test by cobbling together Soundcloud, Dropbox, texting and a high-fidelity mock front-end. Once she had experienced dozens of people using this method and understood what they needed, she officially built and launched the product.

Test Early, Test Often!
With all the options available, there is no excuse for weak validation of problems and target customers early on in your product development process. One test or even a few tests does not qualify a product as marketable or fundable. The more objective tests you do up front, and iterate on those tests often, the higher likelihood you’ll land on a great solution that people want to use and buy.

This blog post is largely inspired by my course, PM101 at Harvard Business School. We focus the most of the semester on best practices for discovery. I have open-sourced the syllabus for this course here.

MBA, Accelerator Or Just Go For It?

You’re in your mid-to-late 20’s and your thinking about being a first time entrepreneur. Maybe you already have an idea for a solution to a problem that needs solving or perhaps you just know in your bones that the entrepreneurial journey is your destiny. You’re probably in your first or second job after undergrad and feeling like now’s the time to figure out how to make the most of this “prime time” in your life – this is the tail end of your defining decade. Perhaps this is the right time, before you have family or other life commitments; or maybe because you feel if you wait too long, you’ll never do it. 

Regardless of where you are in life, if you’re feeling like you are at a cross roads in the early part of your entrepreneurial journey, you probably fit into one of these categories:

Screen Shot 2019-07-23 at 2.44.18 PMI see aspiring entrepreneurs approach these categories in a few ways: Learning as they start their companies, enrolling in an MBA or certificate program and/or applying to a startup accelerator. Some also choose to join an early stage company while they noodle their idea(s) so they can see how others do it and learn from their successes and failures before they strike out on their own. There are pros and cons to each approach and each is a highly personal decision based on your risk threshold, what you’re building, and who you are as a human being. There is no “right” way to do it, but here are a few ways to think about each approach, noting that sometimes doing more than one can be the best formula. 

On the Job (OTJ)

I am a big proponent of experiential learning. Touch a hot flame, you know not to do that again. Take an active listening role face to face with a customer and you’ll learn more about their needs and how you can solve them vs. running a survey or doing passive research on-line. However, some might argue that OTJ learning is a “two steps forward, one step back” approach as you’ll make a lot of mistakes along the way. Some mistakes will be recoverable, but some may be life threatening to your business and almost none of these mistakes can be predicted. Many of the most successful startups got that way because of luck and timing or because they had made/raised enough money to dig themselves out of a hole or two until they got it right.

OTJ_Poll

Questions to ask yourself if you are thinking about this approach:

  • What is your pain tolerance in terms of how far you can stretch your money, lifestyle and idea? Your about to get on a roller-coaster. Do you think you can handle it? Are you ready to hear “no” a lot and live off of ramen noodles and pizza indefinitely?
  • Do you have a strong network of mentors, coaches, advisors, investors and friends to get advice (and potential capital) from? Do you know how to get that advice/money and will you take it or not?
  • How easily do you make decisions? Will the noise of endless advice, competition, differing opinions from employees/co-founders/investors thwart your progress?
  • Are you a good salesperson? Can you recruit talent, fundraise and acquire customers?
  • Do you understand the product development process for your idea? Have you fully explored the problem to be solved, who you’re solving it for and the potential solutions? Do you think you have an MVP that will get you off the ground as you work towards product market fit? How confident are you that there’s an addressable market worthy of you/your co-founder and/or investors taking a risk of time and money on this idea?
  • Are you as in love with the problem you want to solve and passionate about the possible solution as you are in love with being a leader/CEO? Where is your ego in this process? Starting a company is one of the most humbling experiences you’ll ever have – it’ll touch your insides in ways you never thought it could. Are you ready for that?

If a few of the above points give you pause, either figure out how to resolve them before forging ahead, or consider some of the other options below.

Applying To An Accelerator

I’m a big fan of well structured accelerators with strong reputations for developing entrepreneurs and their products (e.g., Y-Combinator (YC) or TechStars). The programming is usually very solid and the results are almost always positive – companies are typically much further along with their business plans and messaging by their usual culminating event, “Demo Day”. Fundraising is also a big part of an accelerator program and the better ones have a pretty strong network of investors eager to fund each cohort. That said, in my recent Twitter poll, 50% of the respondents said that the network was the top benefit. I’ve seen this firsthand from my years of experience as a mentor with TechStars. Whether it’s needing help with introductions, getting advice on business strategy, building products or even just a shoulder to cry on, these networks have proven to be invaluable for entrepreneurs who’ve gotten into a quality program.

accelerators

There are many accelerators out there. In addition big brand names like YC or TechStars, there are a myriad of others that range from niche areas (biotech, robotics, healthcare, fintech…) to city-specific, to those that cater to underserved populations, etc. The list is endless! Here’s how to think about applying to accelerators:

  • Figure out which accelerators are a fit for your idea/company and what you want to get out of their program. It’s no different than applying to college – everything from where you want to live to who you’ll hang out with 24×7 counts in the decision process.
  • Make sure your idea/company is far along enough to apply. I often see founders trying to apply way too early and while it can be a good experience just to go through the process, it’s a big time waster for you, your company and for the accelerator who is evaluating your application if you are not at the right stage.
  • Talk to alumni from programs you’re considering. Find out about their application process and any lessons learned (things they think they nailed, what was the program worth it to them, tips on how to get the most out of the program, etc.)
  • Understand program expectations while you’re running your business. Many founders who get into the more intense programs don’t appreciate how hard it is to keep the momentum of their business while going through the program. It’s like having two full time jobs!
  • If you are definitely applying to a program, line up your references in advance and try to get warm intros to the Managing Directors (MD) of the program. Warm intros are worth a lot in all parts of business, accelerators included. Also, you may find that a warm intro can serve you well if your timing was out of sync with the accelerator’s application process. Sometimes. a company drops out of a program last minute, just before the start date, and a warm connection with the MD could be the fast track to fill that open spot (several companies I’ve worked with have been accepted into programs because of this situation).
  • Apply to more than one and know that some may push you to another location of theirs or class depending on where you are in the process, stage of your company, other cohort needs, etc.
  • If you don’t get into a program, either decide if the time to apply was worth it (maybe it forced you to learn more about you, tune the story of your business or products?) and try again, or move on and keep on trying to accelerate your business on your own.

Getting Your MBA

There are countless reasons one should or should not get an MBA, all of which I will not cover here, but if you are thinking about how to learn about entrepreneurship or further your business, it can be a great way to go. Of course, in most cases it is very expensive and yes, it’s ~2 years “checked out” of the real world, but in the right type of program, it can be a great solution.

DISCLAIMER: I am on the faculty at Harvard Business School, but I try to be unbiased here and cover more general aspects of MBA programs with an entrepreneurial focus. Also, full disclosure: I enrolled in a dual MS/MBA program early in my career and in the end I only completed the MS as I found that particular program adequately met my career needs. I was also self-funded, and in debt from undergraduate school; despite some scholarship money, the added debt was untenable. Most B-schools now have great financial aid and fellowship programs (50% of our HBS students get fellowships), but MBAs are still not for everyone!

Screen Shot 2019-07-23 at 3.11.58 PM

Considerations for whether to apply to an MBA program with an entrepreneurial focus:

  • Cost – can you afford both your time and money?
  • Do you have an idea/company already in process that you want to move forward? How will the particular program help you do that? Are there specific courses for your stage of business, industry or problem you’re trying to solve? Are there faculty, peer mentors or other on-campus experts available to students starting businesses? Is there time during the program to actually work on you company (e.g., experiential courses where you build your business for credit, summer programming, etc.)
  • Do you want to be somewhere where you can find an idea and/or a co-founder? Are the programs you’re looking at known for incubating new ideas and/or fostering co-founder relationships?
  • Are you unsure if you want to be a founder, but would at least like to become a joiner to learn more about startups? Do the programs you’re evaluating offer opportunities for joiners to meet founders building their companies while in school? Do they offer courses that educate the joiners as much as the founders?
  • Beyond the curriculum, what e-ship programming is available in a given program? Do they run accelerator programs or have space for young companies to connect and incubate their ideas?
  • Is startup funding available such as contests, access to venture funds, loan forgiveness for startups coming out of the program, etc.?
  • What access do students have to the school’s network such as alumni, the local startup community, investors, other universities in the area etc.? How do they add value to the entrepreneurial experience of admitted students? Will this network fill in gaps in your current network?
  • If you’re considering the venture side of entrepreneurship, do the programs you’re looking at have an investment-oriented curriculum and/or opportunities for aspiring investors to experiment with investing and learn to work with founders while in school?
  • Finally, what is the entrepreneurship track record of a particular program? How many startups were founded by their alumni (either while in school or within five years of completing their MBAs)? What is their alumni companies’ funding track record? In what other ways are their alumni founders successful (revenue, social impact, focus on diversity & inclusion, strong and ethical business ethos, etc.)

In the world of entrepreneurship, there are so many variables to consider when making just about any type of decision – from what product to build, who to hire, how to sell and how to finance your business. The list is endless and extremely tied to the type of business you are building, your customers and who you are as a leader. Similarly, which route you take to develop your entrepreneurial skills is highly personal. The route one entrepreneur took that worked out well for them does not ensure the same will hold true for you. Consider all of the above and decide which one or combination of all options makes the most sense for you.

Have you done one or several of the above to help kick-start your entrepreneurial journey? Please share your experience and lessons learned in the comments!

From Zero To 100+: Preparing To Lead And Operate At Scale

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Photo Credit: Maria Semelevich

I’ve had many first hand experiences with the excitement and pain of scale at companies that started out with a few founders and soared to over 100’s or 1000’s of employees. At somewhere around 75-100 employees, there is a shift with leadership, teams and individuals and it’s important to plan for it or at least recognize when it’s happening and try to stay ahead of it. I’ve written the below for the CEO/Founder of an early stage company, but most of my advice can be applied to any leader of a scaling organization, even inside a large corporate entity. 

Leadership At ~100

As a company approaches 100 employees, the reality that it’s time to let go starts to hit its founding leaders. It is simply impossible to be plugged into everything. At this stage, you now are likely managing managers and more than ever have to empower your leaders to, well, lead! They will not always do things the way you do them or as well as you do and there will always be a few select things that you must own and decisions that only you can make, but at this stage if you don’t have the confidence and the right people to get things done without you being involved, you’re in for a rough ride. In fact, it is when founding CEOs don’t learn to step up into their roles and empower their leaders that investors/board members begin to lose confidence in the founding CEO’s ability to operate at scale; these founding CEOs end up getting pushed out/replaced. Here are a few tips in areas I find to be the most challenging at this stage:

  • People: When it comes to employees, there are two areas I see CEO/Founders get tripped up as their companies grow: Hiring and People Management. I am a big believer in staying close to the hiring process for as long as possible in the early stages. In my experience, the first 10-15 employees will set the culture of your company and how you lead them will set the tone for leadership going forward. As you start to bring on more members of your team, however, you can’t hand pick every one. Here’s what I  suggest for approaching hiring:
    • First 20-30 employees – If you have inexperienced managers, review candidate resumes together and establish selection guidelines for what qualifies a candidate for a round of interviews. Be part of the interview and hiring process as much as possible to set expectations on what makes a good hire at your company (even if the hiring managers are experienced) and serve as a role model to managers who will eventually do this themselves. This is also a great opportunity for the early hires to get to know you – especially if this is their first startup – getting to know the CEO/Founder can be a recruiting super power! Also, if hiring in general is new to you, get help from advisors/investors with more experience; books like Who or The Five Dysfunctions of a Team can be helpful, but the art of hiring is a skill that takes practice.
    • 50-100 – This is a transition period where you may sit in candidate reviews for key hires where the team decides whether to make an offer or not and why. Your role is not necessarily the decision maker, but rather to offer guidance and mentorship to the team on how to decide. You may interview the candidates at this stage too, but I suggest this be to either A) help a junior manager resolve concerns they have about the candidate or probe more deeply on areas where they feel less experienced, and B) to help close a candidate and sell them on the business and its potential.
    • 100+ – Let go! If guidelines are not set at this point (manifests as bad culture or heavy voluntary or involuntary attrition), then you need to rework the wheel with your hiring team. Otherwise, it’s time to set your team free to make the right calls for their teams’ needs. At this stage – other than your direct hires – you are only on-call as needed for key hires. For example, when VMware was nearing 800 employees, our founding CEO Diane Green was on standby to interview me for the first non-Palo Alto leadership role; both to assess my abilities for the role and to sell me on taking it (and I’m so glad she did!)

      For the people management side of things, consider the following:

    • 0-20 – Early on, just like hiring for the first time, you may be learning how to manage people for the first time. Get help with this and don’t try to figure it out yourself. You will spend more working hours than you ever imagined learning how to navigate people things while running your business, fundraising, etc. Hire a coach or find friends with management experience and lean on them. Read as much as you can and listen to podcasts like Reboot or Masters of Scale. Put your ego aside! Managing is hard, never mind learning how to do it when you’re also trying to launch a company!
    • 20-30+ – The best practice for team size is eight (recently termed the “two-pizza team rule” by Jeff Bezos) . If you’re reaching a point where you have more than 8 people working directly for you or for anyone who works for you, it’s time to scale out a management team. Ideally, bring in some managers who know how to manage vs. promoting all from within. I like to build teams with a balance of each to allow growth within the company but also to have role models and mentors for those who are growing. 
    • 30+ – As you start to have managers working for you, you need to trust them as leaders of their own teams and, similar to setting the hiring guidelines, your job is to set the people-management guidelines. How does one lead at your company? How do you give feedback? How do you establish an inclusive culture, develop employees and create a great place to work? Your job is to make sure these questions are answered and managers in your organization have the support and tools (compensation/equity budgets, training, systems) to manage to these guidelines. A big mistake I see companies at this stage make is waiting too long to hire people experts – both HR and experienced recruiters who get the startup to scale scene. Money invested in these roles early will save you tons of time and money as you scale. The serial entrepreneurs and co-founders of Drift hired their lead people-person as one of their first 5 hires; they learned from past mistakes!
    • Bonus tip: Every early stage CEO/Founder I know is shocked to realize the power they wield. Even if you consider yourself to be “one of the people”, everything you say and do is more impactful that you can imagine. A simple eye roll in a meeting could make a subordinate think they’re about to get fired. A “great job” on a new idea proposal could be heard as an OK or even a directive to proceed. You are powerful and potentially dangerous! This means tread lightly. If you do skip-levels (talk to employees of managers that report to you), never be directive and use the time to listen, only. If you like an idea, tell them, but make it clear it’s something they should discuss with their manager. If you are unhappy with an employee that reports to one of your managers, bring it up with the manager and put yourself in their shoes when you think about how to help them with this employee. This can be especially hard if some of these employees used to work for you directly before you hired their manager, but just imagine if your investor or board member went straight to someone who works for you and told them to do something or that they were poor performers. How would that make you feel? Be empathetic and manage your power carefully.
  • Product: If you’re a product-centered CEO/Founder (vs. say. Marketing- or Sales-centered), the thought of stepping too far away from product details probably sounds frightening! That said, if you have to be part of every discovery session, design review and test of products or features before they release, your company will never get anything done – or learn how to do it at scale. I have seen countless teams at a standstill waiting for the CEO to review their latest product designs because she was out fundraising or handling 27 other fires that needed to be distinguished. Don’t let this happen! Here’s how to avoid it:
    • As early as you can in your company’s lifetime, articulate your company’s True North and product guardrails and evangelize it like crazy to a point where it’s in the DNA of the company. The True North may evolve as the company matures, but keeping it clear and not wavering too often is critical. When I was the CTO at DigitalOcean, our true north was to empower developers to build great software and our guardrail was simplicity. If something new was being proposed and wasn’t to help developers build great software, and/or how it was designed wasn’t simple, it wouldn’t get on the roadmap. It’s the CEO/Founders’ and their leadership team’s job to make sure this is clear to every employee, and if it changes, why.
    • Establish a high level product roadmap that extends no more than 12-18 months; you have no idea how your product(s) or the market will evolve beyond that. Keep it at the broad strokes level – major products or epics within product lines and with clear, measurable, outcomes. Your job is to set the tone at the top and at under 100 employees you can stay pretty close to the details, but once teams get bigger, you will rely on this roadmap and the measurable outcomes to both track performance but also empower your teams to execute. As the company scales towards 100+, you will shift from attending routine product meetings and reading PRDs or briefs to trusting that your team knows what to build and can map it to the high level roadmap. If the roadmap changes over time, so will their work. Just don’t thrash too much – it takes time for new ideas to flourish or major product changes to make an impact. Patience is important here!
    • Once you have a decently sized product team (20+), you must have great product leaders and designers on your team. At this point, your time will more likely spent getting customer feedback and downloading it to your team, brainstorming new ideas and/or selling what you have. It’s OK to have a passion area that you must stay close to – perhaps a new innovation or a unique, personal area of interest, but the bottom line is…let your team execute!
  • Process: Quite simply, as you scale you must focus your attention away from the how and towards the what. At less than 100 employees, you will be thinking about the how related to all aspects of the business (many noted above, but also how to manage funds, manufacturing/shipping if applicable, payroll, insurance…the list is endless!). As you scale and hire experts in these areas, the goal is to let go and empower them to decide the how. Your job is to make the desired outcomes clear. Outcomes are not just financial either – everything from the culture of your company, the reputation of your products/services, and your brand is for you to make clear. As a mom who still shudders every time one of my kids borrows the car, I like to use the teen getting their license metaphor here:
    • 0-30 employees = learner’s permit in-hand, understands the basics, but still needs close supervision/training
    • 30-75 = passed driving test, but still on probation. Can’t drive during certain hours (equivalent to making all decisions solo), still needs some oversight.
    • 100+ = capable of borrowing the car for a weekend road trip with friends. Hand over the keys!

If your leaders feel like you won’t give them the keys, that you are back seat driving, or feel that you’re monitoring their every move, you will not establish trust or allow them to move your company forward. Also worth noting, creating this type of toxic, micromanagement culture of leadership can be a large contributor to CEO/Founder burnout as you try to manage “all the things”. 

Teams and Individuals at ~100

I’m going to keep this part simple. The bottom line is that there are people on your team that will grow beautifully as the business grows and there are those who just don’t do well in a mature environment. Some tips on how to stay ahead of this:

  • DNA: I’ve seen too many talented people become poor performers once a company started to scale simply because they did not have big-company DNA or because the company did not ensure they were in roles where they could continue to thrive. Think about who on your team has real startup DNA – do they thrive with ambiguity and constant change? Are they scrappy and just get stuff done, even though it may not be polished and perfect, but keep the ball moving forward? Do they break the rules in a good way? Now, what happens as your company grows and there’s more complexity in the business and/or more structure? Will they resent the bureaucracy? Will they refuse to be managed or adopt the “special snowflake” attitude that they know better because they’ve been there longest, have an “in” with the founder or have more equity? OR…will they rise to the challenges that come with growth, respect the structure and be seen as the guru among the team? Pay attention to your early hires as they and the company grows. If you see signs of trouble, decide whether there’s a better way for them to contribute without losing them OR decide it may be time to part ways – the company has outgrown them.

    I once had a talented engineer on my team at VMware who was a great prototyper, but not very strong when it came to writing production-level code. Each time we tried to have him follow a project from experimentation to production phases, he would be miserable trying to follow a structured process and the product leads would complain constantly about his attitude and the quality of his work. I was able to carve out a prototyping role for him on my team so we could keep experimenting with new ideas and he could remain happy and productive at the company. Sometimes you can make these things work, but when you can’t, consider how much time you may be wasting trying to force a situation that’s just not going to turn around. Often, the best course of action for those with startup DNA is to go find a new startup and if you can help them get there, even better!
  • To Lead OR Not To Lead: Pay attention to first-time managers who hate (or are bad at) managing, but took on the role as your company grew. Some early hires are put into a management role because of budget/hiring constraints that hate it OR that wanted to be a leader, but were really better suited as an individual contributor (IC). Put a process in place at your company at allows upward mobility in both specialist and management tracks and allow them to move between each. Make that a positive thing vs. having someone take an ego hit or be viewed as a failure for giving one or the other a try. In the early days at VMware, we had such fluidity when it came to people trying manager roles (or stepping into one while we tried to find a permanent hire) and either thriving or deciding it wasn’t for them. No shame, they learned, and were always welcomed back as an IC – in fact, several of them from the early days are now in some of the most senior IC roles at the company. The worst is when you lose a great IC who was a bad manager. By the way, I’ve also seen great leaders try to go back to coding/IC roles with mixed success. Point is, ensure you and your team are in the right roles and are given opportunities to be excellent.
  • Cross-team Dynamics: As the company grows, not only are new teams forming and new managers leading, but there can also be cross-team dynamics that create tension in the company. Most common, product and engineering teams being misaligned or sales/marketing/support challenges. Pay attention to how these interdependent teams interact and make sure your team leaders are as passionate about how they partner and collaborate with their peers as they are about how their own teams perform. Ensure fiefdoms don’t form and resolve any rifts between teams as soon as you suspect there’s an issue. These issues can be toxic and destroy what may have been a humming organization when it was smaller.
  • Compensation & Incentives: As the company grows, so must employees’ careers, compensation and incentives. Be thoughtful about salary structures early on and be mindful that haphazardly compensating new hires early on or bumping people up to retain them will undoubtedly create a need to recalibrate everyone’s compensation down the road. The recalibration process is PAINFUL.

    Remember, employees are motivated by three major things: The work they do, the people they do it with and fair compensation for that work. Throwing money or an unearned fancy new title at an unhappy employee will not retain them if the work they do is uninspiring, if they don’t live up to the expectations of the unearned new role and/or the people they work with are not enjoyable. These quick fixes are temporary. Similarly, beer on Fridays or a foosball table in the office is not as compelling an incentive as are equity refreshes and opportunities to take part in new product work or the chance to work with an industry luminary (or letting a poor performing/toxic peer go). Consider Maslow’s Hierarchy of Needs when it comes to your employees: They need the foundational basics (a desk, computer…), they need to feel safe (steady income, a health plan), loved (great co-workers & managers) and to self-actualize (assigned interesting work, able to reach career goals, achieving wealth to reach personal goals or making a social impact).
  • Human impact of hypergrowth: Finally, people don’t always grow as fast as their companies and can easily burn out or perform poorly if you’re scaling at hypergrowth speed. The best write up on this particular topic is Khalid Halim’s post for FirstRound. I also wrote a brief piece on how hypergrowth of teams can slow down an organization, here.

Scaling a company can be both exciting and daunting. If you’ve never experienced this journey, it can also catch you by surprise when things start to go wrong. The best recipe is managed growth, with an experienced team, getting help from experts and being thoughtful as you scale.

Got other tips on managing at scale? Please share in the comments!

Reflecting On The Intersectionality Of Today’s Pressing Issues

I was so moved at tonight’s event at The Wing in SoHo that I had to write. In the spirit of the anniversary of Stonewall, we had an extremely thoughtful panel of rockstars:

  • Cecilia Gentili – Transgender activist, actor and someone who speaks with deep empathy from countless experiences throughout her lifetime.
  • E.M. Eisen-Markowitz  – Restorative (and Transformative) Justice Coordinator and public school teacher.
  • Wazina Zondon – Founder of Coming Out Muslim and sexuality educator.
  • Alex Berg – Panel moderator, and journalist covering national news, women’s issues, and LGBTQ+ culture. 

My twenty year-old daughter, who has been openly queer from a young age, joined me tonight as my guest. As we walked home, we processed key points from the discussion. A few worth noting:

  • We are privileged white women and we and our family, friends, colleagues, etc. are not doing enough to support real change in this country for the LGBTQ+ community. Putting strong light on the issue and companies changing logos and decorating storefronts to rainbows a few weeks a year is not enough. It’s a conversation and action that needs to happen every single day.
  • The majority of people who are speaking up and fighting for change are putting themselves at risk ahead of those of us who can afford to take real risk. Reflecting on Stonewall, Cecilia highlighted that it was the white privileged professionals who ran from the scene and the less privileged crowd that put their lives at stake to fight back – people who could not afford bail money if arrested or perhaps survive if they were to be imprisoned. 
  • Wazina gave us pause around how we’ve been talking about reproductive rights. This is an intersectional issue, not just a white feminist issue or about who can tell whom what they can do with their own bodies, it’s also a parenting issue: who is ready to be a parent and what that means (emotionally, physically and economically). I applaud her for the work she’s doing with young people around this and other important health, identity and sexuality issues.
  • EM spoke of transformative justice inside schools to change the narrative and behavior vs. the crazy spend in NYC schools to police the problem (over $700M/year!). This is an important issue well beyond our city schools. We need to transform society.
  • On D&I and hiring, we heard stories of companies seeking to be inclusive that are not removing barriers to allow a diverse pool of candidates to apply simply by creating exhaustive list of requirements in the JD (see more of my thoughts on this here). Provide training, mentorship and tuition reimbursement for applicants who have the aptitude and lack the experience. Make it happen vs. complaining “we can’t find the ‘right’ candidates”.
  • Finally, know your political candidates positions and vote for those who understand these issues and are motivated to take action. Now more than ever, we need the right people in office.

I’m definitely going to think deeply about how I can make a bigger impact on these points and take action; with my voice, my dollars and my body if I have to. I suggest everyone else do the same – educate yourselves, open your minds and take action. 

Thank you to the events team at The Wing for organizing this evening! My only constructive feedback (‘cuz you know I have it!) is that there were not nearly enough of your members there or PR around it. We can do better.

Are You Being Strategic About Hiring?

If I had a nickel for every time I get an email or text asking if I know any full stack developers for hire, I could cover the cost of my next trip to SF. I’m also struck by the number of founders who say they’re raising more money simply because they need more engineers to code, yet they do not have a good hiring strategy.

For decades, there have been books and articles about building engineering teams. The infamous book The Mythical Man Month, by Fred Brooks should be on every software engineer and tech startup leader’s reading list (It should also be re-titled either “The Mythical Person Month” OR “Nine women can’t make a baby in one month”…just sayin’). There are also many blog posts explaining why full stack engineers are unicorns. Yet, when I did my latest poll on twitter on top hiring priorities this is the response:

screen-shot-2019-06-02-at-1.20.42-pm.png

Sure, it’s fine to look for a generalist [or augmenting your team with an outsourced dev shop] to get basic stuff done, but being more strategic about your hiring process, is what could be the difference between a great product in the market vs. something basic that is slow to ship. Below are some tips on how to be more strategic about hiring:

  • Product prioritization leads to hiring prioritization: If you’re doing proper product prioritization via discovery – talking with customers and understanding what you need to get to product market fit or grow adoption – then these priorities set the hiring agenda. For example, if you’re realizing that your on-boarding process is too complicated, then hiring a User Experience (UX) person may serve you far better than someone who can code a fresh UI. If performance issues are causing churn, then hire a performance engineer; someone who knows how to diagnose and fix performance issues. Just like you are building a product to solve for the job to be done, hire the engineer for the development job to be done. 
  • Understand the roles: Do you understand the difference between a front end developer vs. designer vs. UX expert? (if you don’t, read this) Are you fluent enough in your architecture to know what type of engineer should be building which elements of your product? Many early stage companies are started by engineers who know exactly what they’re doing, but many are biased in the areas of which they are most familiar, even if that is the suboptimal choice for their current products. I’ve seen products built with .NET simply because the seasoned engineer-founder knows that platform best, without considering whether it is the best platform for their product and/or whether they’ll be able to hire engineers who are skilled in .NET (or want to learn it) to build it at scale. I’ve also seen many startups default to the language of choice for the full stack engineer they found to build their first prototype and then let that language dictate future work as their product gets market fit and scales. This rarely works out, unless that first engineer is a ringer, and most of the time the reality of having to refactor your entire codebase or port to a new language hangs over the product team…forever. 
  • Long term need vs. short term fix: Another common mistake is hiring a full time expert in an area that only needs occasional work. E.g., Performance engineering. Certainly, if you’re building a complex, distributed, application that has heavy computation or many API calls, then a performance engineer is a critical full time hire. However, it may behoove you to find a good contract engineer who specializes in performance tuning as needed; at least until you’re operating at scale. Same thing for a designer – unless you’re at scale and adding new features/products at a steady clip, then a contract designer may be prudent while you iterate on your MVP. You may pay a little more per hour for these contractors, but that far outweighs over hiring and paying a full time salary early on. 
  • Time Delay + J-curve: Just because you have cash in hand to hire, doesn’t mean you will find and hire the right people right away AND each time you add a new person to the team, there will likely be a j-curve impact on productivity.
    Screen Shot 2019-06-03 at 1.47.59 PM.png
    Therefore, when you prioritize hiring, factor in how long* some roles will take to fill (e.g., we don’t need a designer for a few months, but it could take three months just to find the right person) and be thoughtful about the cadence of adding new people to any team. Adding a bunch of new engineers at once is not going to accelerate development over night. Each time a new person comes on board, it’s disruptive to team’s flow – and this is not just about training them. It disrupts the whole
    dynamic of the team. If you’re doing a lot of hiring over a discrete period of time, set the right expectations (with yourself, your company and your investors) that a ramp in hiring will likely slow things down until new teams settle into new norms. If the ramp is constant, by the way, your teams will never settle into a groove leading to employee dissatisfaction, high turnover, product delays, etc.

    *This delay should also be considered in the budget exercise for these roles. Don’t front-load salary expenses for open jobs that may take weeks or months to fill. 
  • Humans are not robots: Hiring is hard, and even when you get really good at it, at the end of the day these hires are human beings that have their own unique needs, past-job baggage and career aspirations. Their added productivity, how they diversify and/or add to your culture is only part of the consideration. Having a strategy to prioritize manager, team time and money for their human needs (benefits, HR support, a strong on-boarding experience, ongoing training and mentorship, etc.) is just as important as having a strategy to prioritize these hires! 
  • Apply the 80-20 rule: A great product leader will tell you that if you invest 80% of effort to understand the problem, it should result in 20% effort to build the right solution. The same applies to hiring. If you take 80% of your effort to develop a great hiring strategy and program, it should lead to 20% of the effort to bring great people on board and retain them for the long term. 

There’s a severe opportunity cost that comes with bringing on the wrong people and/or at the wrong time and not having the right people programs in place. Even if you are a tiny early stage company, having to let someone go, or having them quit, and finding a replacement not only stresses out the manager and team, but there is a productivity hit to all while you go through the process. Even though it may feel like you’re moving slowly through the process of building a team, a strategic approach will pay off.

You can read more about my thoughts on hiring for startups here. Please share other ideas on this topic in the comments!

Beyond Their Funds, How Can Your Investors Be Helpful?

An entrepreneur recently said to me “When it gets really hard, I feel like I’m doing it wrong.” She went on to say that sometimes she’s not sure how her investors could be helpful — even if it’s just validating what’s hard vs. advising on how to work through certain challenges. I’ve heard other entrepreneurs say they’d like to get help from their investors but worry that purely by asking for help it will signal a weakness. Conversely, I’ve heard investors say they wish the leaders of their portfolio companies would be more transparent about challenges they are facing and ask for help. As one investor said to me recently, “They already sold me on the business and have our money. It’s now our firm’s job to help them succeed.”

In an informal Twitter poll I recently conducted, 56% of entrepreneurs who responded said their most common ask of their investors is for hiring help. Second to that (31%) are asks for introductions to potential partners or customers and a small percentage (13%) tap their investors for financial management advice.

I also polled my investor friends on what questions they like to get from their portfolio companies. What they shared made it clear to me that they can and want to be helpful well beyond their funds!

“Good entrepreneurs are learning machines so they’re always asking for advice and guidance from multiple sources of expertise, including their investors. In fact, the best founders are outstanding at squeezing every bit of insight, advice and contacts from their network of investors and advisers.“ Jeff Bussgang, Flybridge Capital

Do you know how to get the most from your investors? Below, I have outlined what I consider to be basic asks (table stakes) as well as suggestions for deeper asks.

What To Ask For

Hiring

Table Stakes:

  • Referrals and warm introductions
  • Posting job links on their websites
  • Invitations to recruiting events

Beyond the Basics:

  • Seek examples of job descriptions (JDs) and/or critiques of those you’ve written. Most investors were operators once and have a good sense of how to write a good JD; they may also have a recruiting arm at their firm who can counsel you on specific searches. [See point on compensation in Financials, below]
  • New to hiring? Practice interviewing candidates with investors or their associates before bringing actual candidates in for the real interview.
  • Resume screening can be an easy ask and a quick job for someone who’s seen 100’s if not 1000’s of resumes. Experienced eyes can point out immediate red flags and give you specific areas you may want to probe for a particular candidate.
  • Invite an investor to help diversify an otherwise homogeneous interview team. This can be a game changer for a candidate who may otherwise feel like they are a token hire. Knowing the extended team around the business is diverse, can allay these concerns.
  • Ask your investors to help sell the business to prospective candidates. This can be especially critical if you’re trying to hire a senior team member or a start-up first-timer.

    “This is something we continue to do, even with mid-level hires in mid-stage companies when the founder feels like a highly desirable candidate could use an extra push. It’s not a huge burden on our side, but can have a very strong positive impression on the candidate who probably feels like getting board/investor visibility is a strong positive in their career development. “ Rob Go, NextView Ventures

  • Investors can also be helpful offering insights on how your company is perceived as a workplace from their own perspective or from feedback they’ve garnered in the market. (people talk…)
  • Finally, but very carefully, investors may be able to help you get backdoor references on potential hires. I wrote more about this particular topic here. Backdoor references can be helpful, but only if done right!

Marketing, Sales & Partnerships

Table Stakes:

  • Introductions to potential customers and/or partners
  • Putting your company logo on their website; putting their firm’s logo/board member on your website
  • Invitations to marketing & sales events
  • Tapping their social media presence for sharing news and events

Beyond the Basics:

  • Investors look at markets all day, every day, and have an objective perspective on not just current market forces, but patterns over time and how markets move and customers buy. They may not know your specific market details or the intimate buying patterns of your target customer, but as Bob Mason of Project11 says “We often ask the right questions informed by our opportunity to step out of the day to day urgency of running the business. We have enough knowledge to understand the big market forces, see patterns from other businesses and can help drive an engaged dialogue. For the engineering-centric founders, you can think about this as ‘debugging’ an issue. When coding, you might bang your head for hours trying to find the root cause of a hard bug. But you bring over a colleague and talk through the situation and often a solution will appear. They didn’t tell you the answer, but the process of conversation brought insight to your mind.”
  • Whether you are building an enterprise product and need access to a buyer inside a potential large customer or trying to develop partnerships for your business (B2B or B2C), investors can provide invaluable insights on what drives particular companies, who the “real” decision makers are and how their buy/partnership process works. They can reach out to execs at companies and get an early feel as to how important such a potential deal or relationship could be.
  • Investors are generally good at analyzing marketing or sales funnels. If they are former marketers or sales people, they should be able to help you understand the “magic moment”, points of stickiness, drop off, etc.. They also won’t have the biases you likely bring to the table and can look at the numbers objectively.
  • Investors can be helpful with developing your company and product story as well as speak with folks in the industry to see how the story resonates.
  • Beyond offering advice on digital marketing and leveraging social media, your investors may also be helpful with brand awareness and offer PR opportunities. Perhaps they are sponsoring an event where you or a key member of your team can be a speaker? If one of your investors is a blogger, ask for a mention in their next blog post about a topic you’ve been discussing, or perhaps even a guest blog spot. Be creative about how your investors can help shine a light on your brand, product and team!

Product

Table Stakes:

  • If they can use your product as a firm or as individuals, they better be using it! Whether it’s for testing the MVP or to dogfood the brand, no excuses. There’s nothing more compelling than an investor who offers you a cup of coffee made with one of their portfolio company’s new beans or the investor who has a “powered by” one of their companies on their website. Have you asked your investors to use your product?
  • When asked (or not), investors never lack for advice on how your product can improve. Just remember, you are in it every day, they are not. So, always weigh that advice against what your team is discovering with your customers and progress accordingly.

Beyond the Basics:

  • If your investor is a former operator, especially at an early stage company, odds are they have built/tested many an MVP. Engage them in the MVP discussion. Review product priorities and test plans. Again, their objectivity and experience could give you a fresh perspective. This will also help them understand the tradeoff decisions you are making and can be very informative when it comes to strategic thinking about the company’s product roadmap and long term direction.
  • Speaking of roadmaps, if you’ve got a former head of product or VPE on your investor team, invite them to a planning session. Same reasons as above — fresh perspective and added insight when it comes to bigger picture discussions.
  • Security and compliance is an area often overlooked and where investors can probably draw on their own or other resources to ensure your company doesn’t get tripped up on a sale or regulatory issue because an “I” was not dotted or “T” crossed. They may have access to pen testers or be familiar with compliance requirements for things like PIAHIPPA or SOX through other portfolio companies’ experiences; even if it’s just asking when to worry about it vs. holding off on investing in this work.
  • Also helpful is tapping investors’ technical EiRs and/or network. When I was CTO at DigitalOcean, it was amazing to have someone like Martin Casado at a16z, our lead investor, to bounce ideas off of and even help us with some tricky architecture decisions. Similarly, my friend Jocelyn Goldfein of Zetta Venture Partners said she’s often tapped by her portfolio companies to help with developing data strategies and answer questions about data rights. Know who the experts are in these firms and they’ll probably love the opportunity to get into the details with you since it’s no longer their day job.

People

Table Stakes:

  • If they are involved with financial planning, investors should be helpful with basic headcount and organizational growth plans (what roles to fill, how many and when)
  • Investors are generally not shy about telling you (sometimes unsolicited) if they think a key employee they are interacting with is great, needs coaching or may not be successful in your organization. Just remember, if you have a board, other than the CEO, they don’t make hiring or firing decisions. That’s your job.

Beyond the Basics:

  • Whether they were former operators, or have just seen a large number of companies operate, investors can give helpful insight around people and culture. You can ask how to work through team challenges, enhance your company culture or even how to make remote teams work. If they’re not the experts in these areas, they likely have companies in their portfolios who are doing creative things or who maybe learned from mistakes and are willing to share tips and tricks to avoid pitfalls as you scale.
  • While it may make you feel vulnerable, asking your investors for guidance around your own personal development demonstrates your willingness to grow — especially if you are a first-time CEO, or other member of the C-Suite. I’ve seen investors coach leaders on everything from how to lead their teams and handle challenging employees to how to run a great board meeting. I’ve also seen investors support and sometimes even pay for executive coaches and training programs for high-potential leaders.

    “Drop your shields, if you think asking for advice or help from your investors is showing signs of weakness you have it all wrong. Your investors are by definition already on your side and any problem you are facing or any area of growth where you think they may be able to contribute to or connect you to someone who can be helpful, go for it. I want leaders to ask me ‘what am I doing wrong, where can I level up?’” Reed Sturtevant, The Engine

  • Beyond headcount and budgets, investors with experience leading teams at scale can be very helpful with how to think about organizational design through various stages of growth. Investors can also have a really good sense of leveling across organizations and have seen a lot of creative approaches used across companies.

Financials

Table Stakes:

  • Investment checks
  • Future rounds  —  financing strategy, valuation, etc.

Beyond the Basics:

  • It’s never too soon to get “budget religion”, especially if you have a capital-intensive business where you need to figure out working capital, financing with manufacturing, etc.. Ask for guidance on how best to manage your funds as well as how to track burn and prepare data for future financing to make the diligence process easier for new investors. They may even have models or frameworks other portfolio companies use that you can borrow.
  • Not sure whether your compensation packages are competitive or fair? Or how to think about equity vs. salary splits? Comping your sales team? Your investors have probably seen many different configurations and can help you get creative if you’re trying to land a key hire or to retain and motivate your current team.
  • Other financial areas where investors can be helpful are ways to think about marketing spend as a ratio of investment in engineering or sales/revenue, pricing models and tax considerations.

In all of the above cases, if your investors can’t help you directly, odds are very high that they know someone who can. Good investors won’t expect you, especially if you are a first-time founder, to figure it out all by yourself. For me personally, I always appreciate the humility that comes from anyone who knows what they don’t know and asks for help. It is impossible for anyone to know everything!

How To Ask

There are three ways I think every founder should interact with their investors outside of board meetings (if you have them).

  1. Investor update emails are always a good vehicle for asks. If you’re not sure if anyone on the investment team can be helpful, be specific: “Looking for advice on digital marketing strategies.” or “Would love to talk with someone in your network who can advise my team on HIPPA compliance.”.
  2. Routine 1:1 calls or meetings are a must. This establishes a good touchpoint with investors to establish a rapport and catch up informally instead of waiting for a crisis or issue to arise as a reason for a call. I suggest you always have at least one ask for these meetings and always follow up with a quick email with that ask in writing.
  3. Identify at least one domain area where each investor may serve you best (e.g., I am usually the go-to person for product & engineering or organizational planning for my angel investments and advisees). When the needs arise, set up face-time to dig into that specific topic with that investor.

Remember, your investors are not just here to provide cash. They are invested in you and your company’s success. As Jason Seats of TechStars says, when in doubt, “pretend that they are not an investor and figure out what you’d ask them. If you can’t come up with anything, they may not be a good investor for you.” This can also be a nice hack around targeting the right investors from the start.

Have other examples of ways your investors have been helpful beyond their funds? Please share in the comments.

 

Go Big, Or Go…Startup

big Fish Little Fish

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A common career advice question I get all the time is what the tradeoffs are between going to a startup vs. going to a big company. There are many things to consider and lots of “it depends” when it comes to where you are in your career, where you live etc., but when it comes to the general aspects of a startup vs. mature company, most of the situations don’t vary that much. I’ve done both, several times, so here’s a perspective on the tradeoffs based on my own experiences.

Startup vs. Mature Company

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(c) 2018 Julia B Austin

Putting aside for a moment industry and how you feel about the products the company is building (both of which are very important!), most of the differences between a startup vs. a mature company are pretty obvious. In a mature company, you will likely have more role models to learn from and stronger teams to collaborate with, a clear direction and a mature board. The role you consider may have a narrow scope, but could offer deeper learning and of course great benefits, compensation, etc.. You’ll also get exposure to what good (or bad) looks like at scale and possibly a nice brand for your resume.

Startups can offer a chance to do “all the things” which can be either a blessing or a curse depending on your interests. You may miss out on having peers to collaborate with, have to look outside of your company for mentors and role models or have limited budget to get stuff done, but you may get high value equity in exchange for lower than market-level pay. If you want to dig more into deciding which startup to join, I suggest Jeff Bussgang’s book Entering Startupland which goes deep on the different roles at startups and how to get your foot in the door.

Leadership

One thing often overlooked when considering a new job is the leadership of the company. Serial entrepreneurs will have a very different approach than someone who has limited real-world experience and mature company executive teams can be world class or “legacy” leaders who can’t move with the times. There are many tradeoffs when factoring in leadership into the decision process of startup vs. a mature company.

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(c) 2018 Julia B Austin

Startup founded by serial entrepreneurs: This can often be the best case scenario if you want to learn from those who have “seen the movie before”. They likely had no issue raising money and were selective on who their investors were and who sits on their board. They will know how to get the flywheel moving incited by past mistakes OR failures.

“When I started my fifth company I knew exactly how I wanted to build the team. So, on day one I hired a head of recruiting to get things off to a strong start. I also knew market adoption would be critical to fundraising so focused on growth very early on – before we even had a product!” – David Cancel, CEO & Co-Founder Drift

Serial entrepreneurs may also try to overcorrect in areas where they failed the first time, such as over analyzing or delaying decisions, being too conservative on cash flow or focusing too much on scalability too early in the product development process. If you’re interviewing with a serial entrepreneur, it’s always good to ask what lessons they learned in their last startup and how they’re bringing those lessons into their new venture.

“I joined Drift in part because I wanted to learn from the experience of the co-founders. They’ve seen it before so they anticipate issues, they know when (and how) to hire experts to level up the team, and they know what’s “normal” for a hypergrowth company. It’s the best of both worlds: you get the rollercoaster startup experience with some of the more measured leadership and strategic characteristics of a bigger company.” – Maggie Crowley, Product Manager Drift

Industry veterans doing their first startup: Founders coming from mature companies with no startup experience can have big company confidence, be great at hiring and leading teams, but lack scrappiness to get a Minimum Viable Product (MVP) out the door and work towards product market fit.

“At our first startup after a series of roles at large enterprise software companies, we tried to force a big company perspective on how we did employee feedback and reviews. We were too structured with this initially and quickly cut back to a more loose feedback and review process with our team.” Izzy Azeri & Dan Belcher, Co-Founders Mabl

They may also be too used to having teams of people and systems in place to cover the more mundane duties of running a company and don’t want to get their hands dirty. On the flip side, they often know how to implement those processes and know the people to hire to run them so once the flywheel is moving and cash is in-hand, they can get momentum quickly.

“Earlier in my career, I hired a small team within a large corporation that was scrappy and had entrepreneurial mentality. At my startup, I quickly realized the benefit of once having a corporation behind me when things weren’t working out. The impact of a bad decision or process was much greater with no safety net.” – Karen Young, CEO & Founder Oui Shave

Startup with limited leadership experience: Working with a skilled group of founders leading teams for the first time can be tons of fun. If you bring some experience to the table, it can be very gratifying to not only work from the ground up, but also work alongside these founders as they grow. However, it can be frustrating if you find yourself figuring out things on your own because there’s no one in the company to mentor you. These situations can be very rewarding if you’re patient and you can always get outside mentors and advisors if they’re not available at this type of startup.

“When we started, we got a lot of advice like: stay focused, don’t expand too quickly, be careful that experienced hires match your culture.  All good advice, but we discovered there’s no real substitute for learning the hard way. The lesson just doesn’t sink in until you feel the pain of doing it wrong.” Wombi Rose, CEO & Co-Founder LovePop

Mature company with inexperienced leadership: If they made it this far, they are either wicked smart, lucky or both! More likely they also have surrounded themselves with strong, experienced leaders, investors and/or board members. You can learn a lot from joining a company like this, but they are very, very rare! When companies scale too fast, they can also suffer from having people in roles that have outgrown their experience. Read more about the impact of Hypergrowth situations written by my friend at Reboot, Khalid Halim, for First Round.

Mature companies with experienced leadership: These organizations have all the standard things you’d expect. Probably more politics and process than you’d ever find at a startup, but the benefit of exposure to great role models and best practices can be invaluable. Sometimes, these bigger companies can also expose you to the “dark side” of leadership and processes which are also great learnings on what not to do in your next job or company you may start yourself.

Which comes first in your journey?

For those doing early career path planning and knowing they want to do both a startup and a mature company at some point, there’s always the question of which should come first. Hiring managers at early stage companies can get “spooked” when they see someone with too much time (5+ years) at mature companies; questioning whether the candidate will be able to transition to startup life. Not that it’s impossible, but it’s something to consider. For these candidates, I suggest highlighting any scrappy “ground zero” work they may have done at their companies to demonstrate they can handle ambiguity and take risks. I am also a huge (and very biased) fan of people who’ve joined companies early and scaled with them. They have learned a TON from those experiences and can often start scrappy, but know how to operate at scale. Win-win.

Conversely, someone with a lot of startup experience may have a hard time adjusting to mature company. A hiring manager at a mature company may question whether a candidate with only startup experience can handle a slower pace or won’t know how to navigate a complex organizational structure that requires political and communication savvy. You may have to sacrifice title and maybe some salary to get a foot into larger institutions who may view your past role, which may have been very senior at a startup, to being pretty junior if those around you have decades more experience. However, I always find those with startup experience can be invaluable to a team that needs to be shaken up, take more risks or explore new ground. Often, those who sacrifice title and pay when they joined, make it up fast as they move up the chain in a larger organization.

There’s no right or wrong place to start. A lot depends on how you define your skills and how willing and patient you are in either case to adjust. Much can depend on who hires you and their management philosophy. I’ve seen some people bounce between both types of situations over and over, some that just can’t handle startup life, and others who have startups in their DNA and should just stick with that world 🙂

“At a startup, every job matters and you can see almost daily that you are creating something that wasn’t there before. You have the ability to learn quickly and have a fast feedback loop to let you know how you’re doing. It’s very different working at an established company vs a startup, but you can learn a lot at both – you’ll just learn very different things.” – Rebecca Liebman, CEO & Co-Founder LearnLux

Questions To Ask

Regardless of whether you are a seasoned veteran or fresh out of school, as you ponder whether you want to join a startup or a mature company here are some final things to consider:

  • What tools do you want to add to your toolbox? Will the role allow you to hone skills you already have or add new ones?
  • Who do you want to learn from, and how do you want to learn? You can learn from experienced colleagues and mentors, but having bad role models can also teach you a lot about what not to do. Similarly, if you are an experienced hire coming into a company started by inexperienced founders, you may want to learn by mentoring or teaching these young leaders. Taking the skills you’ve developed over your career and applying them to a new situation in itself can be a very enlightening experience.
  • Who do you want to work with? How important is the size and culture of the team you’ll work with? Remember, you’ll probably spend more waking hours of the day with these people than anyone else in your life – regardless of the size and nature of the company you join.
  • What do you value? At the end of the day, love what you do and decide what role will allow you to maintain the integrity of who you are and who you aspire to be!

Do you have other tips on how to decide whether to join a startup vs. a mature company? Please share in the comments!