Category: Management
At TechStars, we talk often about “mentor whiplash” – the thing that happens when you get seemingly conflicting advice from multiple mentors. Talk to five mentors; get seven different opinions! This is normal, as there is no right or absolute answer in many cases, people have different perspectives and experiences, and they are responding to different inputs (based on their own context), even if the data they are presented with looks the same on the surface.
Yesterday, Steve Blank and I both put up articles on the WSJ Accelerators site. The question for the week was “When should you have a board of directors or a board of advisors?” My answer was Start Building Your Board Early. Steve’s was Don’t Give Away Your Board Seats. I just went back and read each of them. On the surface they seem to be opposite views. But upon reading them carefully, I think they are both right, and a great example of mentor whiplash.
For context, I have enormous respect for Steve and I learn a lot from him. We are on the UP Global board together but have never served on a for-profit board together. We both started out as entrepreneurs and have spent a lot of time participating in, learning about, and teaching how to create and scale startups. I’ve been on lots of boards – ranging from great to shitty; I expect Steve has as well. While we haven’t spent a lot of physical time together, all of our virtual time has been stimulating to me, even when we disagree (which is possibly unsettling but hopefully entertaining to those observing.) And while we are both very busy in our separate universes, my sense is they overlap nicely and probably converge in some galaxy far far away.
So – when you read Steve’s article and hear “Steve says don’t add a board member until after you raise a VC round” and then read my article and conclude “Brad says add a board member before you raise a VC round” it’s easy to say “wow – ok – that sort of – well – doesn’t really help – I guess I have to pick sides.” You can line up paragraphs and have an amusing “but Brad said, but Steve said” kind of thing. I considered making a Madlib out of this, but had too many other things to do this morning.
But if you go one level deeper, we are both saying “be careful with who you add to your board.” I’m taking a positive view – assuming that you are doing this – and adding someone you trust and has a philosophy of helping support the entrepreneur. From my perspective:
“… Early stage board of directors should be focused on being an extension of the team, helping the entrepreneurs get out of the gate, and get the business up and running. Often, entrepreneurs don’t build a board until they are forced to by their VCs when they raise their first financing round. This is dumb, as you are missing the opportunity to add at least one person to the team who — as a board member — can help you navigate the early process of building your company and raising that first round. In some cases, this can be transformative.”
Steve takes the opposite view – concerned that anyone who wants to be on an early stage board is resume padding, potentially a control freak, or the enemy of the founders.
“At the end of the day, your board is not your friend. You may like them and they might like you, but they have a fiduciary duty to the shareholders, not the founders. And they have a fiduciary responsibility to their own limited partners. That means the board is your boss, and they have an obligation to optimize results for the company. You may be the ex-employees one day if they think you’re holding the company back.”
Totally valid. And it reinforces the point we both are making, which Maynard Webb makes more clearly in his Accelerator post ‘Date’ Advisers, ‘Marry’ Board Members. When I reflect on my post, I didn’t state this very well. Anytime you add an outside board member, you should be reaching high and adding someone you think will really be helpful. You are not looking for a “boss” or someone who is going to hide behind their abstract fiduciary responsibilities to all shareholders (which they probably don’t actually understand) – you are looking for an early teammate who is going to help you win. Sure – there will be cases where they have to consider their fiduciary responsibilities, but their perspective should be that of helping support the entrepreneurs in whatever way the entrepreneurs need.
The power of a great entrepreneur is to collect a lot of data and make a decision based on their own point of view and conviction. You’ve got a lot of info – including some different perspectives from the WSJ Accelerators segment this week. That’s their goal – now I encourage you to read the articles carefully, think about what you want your board to be like, and take action on it.
At this year’s NVCA meeting, my partner Jason Mendelson (who was the chair of the event) interviewed Dick Costolo, the CEO of Twitter. Dick is an awesome CEO, awesome human, and awesome interviewee. Among other things, he’s hilarious, and PandoDaily wrote a fun summary of the interview in their post What CEOs could learn from comedians.
Dick had many great one liners that fit in 140 characters as you’d expect from someone who is both the CEO of Twitter and was once a standup comedian. But one really stuck in my mind.
It’s not your job to defend your team. It’s your job to improve your team.
Upon reflection, all of the great CEOs and executives that I’ve ever worked with believe this and behave this way.
Every time I make an investment I believe it is going to be an incredible success. I don’t know any VC who invests thinking “eh – this will be mediocre. When you start the relationship you believe it’s going to be massively successful. The same is true of hiring an executive. Dick made the point that the cliche “only hire A players” is completely obvious and banal. CEOs don’t run around saying “hey – let’s hire C players – that’s what we want – C players.” Everyone you hire is someone you think will be an A player, by definition.
But, in the same way that every VC investment doesn’t become a 100x return, every person you hire won’t turn out to be an A player. After a few months, you start to really understand the strengths and weaknesses of the person. And you see how the person interacts with the rest of your team. This is normal – there’s no way you could know any of this during the interview process.
The not so amazing CEO or executive immediately falls into a mode of trying to defend the person, or the team, to the outside world (board, investors, customers) and other members of the team. I’ve heard a remarkable number of different rationalizations over the years about why a person or a team is going to work. And, when I press on this, the underlying response is often simply “give us / me / them more time.”
Instead of defending the team, the amazing CEO will respond with “yup – we need to get better – here’s what we are doing.” And then they’ll add “what else do you think we should do?” and “how can you help us improve?” This type of language – accepting reality and focusing on improving it, rather that defending it, is so much more powerful.
Of course, often the answer is that to improve a team, you have to eliminate a person or move them to a very different role. This is hard, but it’s part of the process, especially in a fast growing company. Someone who was incredible at a job when the company is 50 people might be horrible at the job when the company is 500 people. Nothing is static – including competence.
This is true of CEOs as well. We can all be better at what we do – a lot better. It’s easy to fall into the trap of defending our own behavior when someone offers us feedback or constructive criticism. The walls go up fast when someone attacks us, or we fail. But if you switch immediately from “defend” to “improve”, you can often get extraordinary feedback and help in real time. And sometimes you have to replace yourself, as Jonathan Strauss at Awe.sm did recently and explained in his tremendous post Replacing Oneself as CEO
I loved working with Dick at FeedBurner – I learned an incredible amount from him. I treasure every minute I get with him these days and one of the biggest bummers about not being an investor in Twitter is that I don’t get to work with him on a regular basis. It was joyful to listen to him and realize that there is another wave of people at a rapidly growing and very important company that are learning from him, as he works to improve his team on a continual basis.
Our Foundry Group CEO list lit up this morning with a question about CEO coaches and whether they were helpful.
My quick response was:
I think a great CEO coach can be awesome and not-great CEO coach can be very detrimental. Jerry Colonna is the best CEO coach I’ve ever met or worked with. There are others that I’m sure will emerge from this discussion but make sure you know what you are getting / looking for.
Like many of our CEO threads this one filled up quickly with great thoughts and suggestions. Then one just nailed it.
“The key for me is that it was a cross between coaching and therapy. You can talk about business issues *in the context* of how you feel about them. This is a crucial benefit, because no matter how good your relationship with board members, expressing those feelings necessarily affects the business conversation; and no matter how astute your spouse, he or she is likely not to put enough weight on the business considerations. Consequently, the normal mode for a CEO is to have all of it in your head; and sometimes it just rolls around in there and makes you crazy.
I suspect this is true no matter how “transparent” you are.
Consequently, the key for a CEO coach is that they be able to quickly understand the business issues AND the emotional issues, and tie them together.”
CEO coaches aren’t for everyone, but I’ve seen amazing impact when a CEO gets a match with a coach that fits well with what he/she needs. And I’ve also seen the opposite – total mismatches between coach and CEO that drove the CEO over a cliff. Make sure you know what you are looking for, and assess regularly what you are getting from the relationship. But don’t be afraid to try.
I’ve been on a lot of boards. I’m still on a lot of boards. And I’ve been thinking about boards a lot as I work on my next book Startup Boards: Recreating the Board of Directors to Be Relevant to Entrepreneurial Companies.
I used to think every board needed a chairman and early in my investing career I was often this chairman (or co-chairman). At some point I began feeling like the chairman role in a private company both undermined the CEO and sent the wrong signal to the employees of the company, and I preferred that the CEO be the chairman. I also started disliking being the chairman, as it seemed to create a view that I had some kind of ultimate power and responsibility for the company that I rarely had, and that almost always belonged to the CEO. So I stopped being chairman and in a number of cases refused to be called it, even when I played the role of it. The one exception I made was non-profits, where chairman seems to have a somewhat different connotation. And since I’ve decided not to be on public company boards, I don’t have to make a decision in that context.
Several years ago I started using, and encountering, the phrase “lead director” more frequently. Recently, I decided it’s the right one and have used it to replace chairman in my vocabulary. And, when asked the question, “does a private company board need a chairman”, I now say “no, but it needs a lead director.”
The lead director is responsible for working with the CEO to manage the board of directors. The lead director is always the most active director and in many cases represents the largest non-founder shareholder in the company when a company is private. The lead director is not the communication conduit to the CEO – every director interacts directly with the CEO – but the lead director gets involved in any conflict between a director and the CEO, any concerns that arise, and any conflicts between directors. And the lead director helps the CEO manage the board meetings.
The lead director should be the CEO’s board confidant, organizer, and conflict resolver. I sort of like the word consigliere, as used in The Godfather, a lot, although it has both obvious negative connotations and a different actual function in real life than the one represented in the film, so I’m searching for a better one.
When I look at the boards I’m currently on, I play this role in many, but not all of them. And the phrase feels correct to me.
Do you have a lead director on your board? How about a chairman? What do they do and how does it feel? And is there a better word than consigliere?
Now that we are in March, you should have a pretty good view of how your Q1 is likely to end up. If you are a revenue generating company, you’ve probably got a formally approved 2013 plan by now (if not, why not?) Your board is paying attention to your performance against plan, and you and your management team are executing based on the plan you had approved, which likely includes both a revenue plan and an expense plan.
If your sales and revenue are not on or ahead of plan, it’s time to take a hard look at what is going on. Q1 is the easiest quarter to make since you just created the annual plan. If you miss Q1, especially in a recurring revenue, services oriented business, or adtech business, there is almost no way you will make it up over Q2 – Q4. Sure – it’s nice to think something magic, special, and happy will happen, but it almost never does.
Step 1: Put on the brakes right now on discretionary spending, especially headcount. You are probably spending at plan. If sales / revenue / MRR are behind plan, you are just creating a bigger problem for yourself.
Step 2: Do an aggressive root cause analysis of why you missed Q1 so far (January and February). Use the five whys approach and keep digging until you actually understand what is going on. Don’t let your sales organization wave things off. Don’t assume it’s all going to come together on 3/31. Don’t assume the high level metrics you are looking at tell the story. Go deep as a management team. Get everyone on the management team in a room for the day on Saturday 3/9, and figure it out. Yeah, I know some of you are going to SXSW – figure it out. It’s important.
Step 3: Keep playing through on your plan for all of Q1 other than discretionary spending. Be surgical about what is going on. Use this as a wakeup call that you aren’t executing well yet, or at least to the plan you put out there. Do you have confidence you’ll make it up in March? If you do after you think hard about it, then you’ll know in a few weeks. But don’t wait for those weeks to pass to get your mind into the issue.
Step 4: Re-forecast Q1 and the rest of 2013 based on what you expect the actuals for Q1 to be. Again, go deep. You just created an annual plan so the process and the numbers should be fresh. Use it to re-forecast based on the new information you learned in January, February, and Step 2. Get it in shape so that after you know the score for Q1, you can quickly put it in front of the board.
Step 5: Call a board meeting for around April 15. Make this a Q1 review and Q2 – Q4 planning meeting. As part of this, get a new 2013 plan approved that takes into consideration what you learned in Q1.
Don’t panic, but don’t be caught off guard. Assume you won’t make things up and get ahead of them by figuring out what your real trajectory is.
Oh – and if you are beating your Q1 plan, then start thinking about how you can accelerate and grow even faster!
Chris Dixon has a good short post up titled What the smartest people do on the weekend is what everyone else will do during the week in ten years. He wrote it on Saturday so it’s got a delightful self-referential twist to it now that he’s a partner at A16Z.
I’ve always thought this was a great interview question. I’ve used it with founders of companies I’m looking at investing in, TechStars founders, and execs for early stage companies. Basically, anyone who I’m trying to understand what they are thinking about long term. The variety of answers is fascinating, often deeply personal, and occasionally very confusing to me. But they are always enlightening.
My answer for a long time has been “write, read, spend time with Amy, run long distances, catch up on what just happened the previous week, and recharge myself to go back into the fray on Monday morning.” Amy likes to look at me on Sunday night and assess whether I’m patched up and ready to go again for another week. Unfortunately, there have recently been too many Sunday’s where her assessment is that I’m not and need another day, which I rarely have.
The idea, and execution, for all of the Startup Revolution stuff came out of what I do on the weekend. A lot of thinking about it rolled around in the back of my brain during long runs. While I wrote Startup Communities during two months last summer, most of my work on Startup Life was done between 5am and 9am during the weekend and over the weekends during September and October. And Startup Boards seems to be following the same pattern for me.
I’m mid 2011 I wrote a post titled Competition. Things in my universe had heated up and many of the companies I was an investor in were facing lots of competition. It’s 18 months later and there’s 10x the amount of competitive dynamics going on, some because of the maturity, scale, and market leadership of some of the companies I’m an investor in; some because of the increased number of companies in each market segment, and some based on the heat and intensity of our business right now.
I wrote a few more posts about competition but then drifted on to other things. But I came back to it this morning as I find myself thinking about competition every day. Yesterday, I was at the Silicon Flatirons Broadband Migration Conference hosted by my friend Phil Weiser. I go every year because it’s a good chance for me to see how several of the parallel universes I interact with, namely government, academics, broadband and mobile carriers, incumbent technology providers, and policy people think about innovation in the context of the Internet.
News flash – most of them think about it very differently than I do.
One thing that came up was the idea of creating the best product. This has been an on and off cliche in the tech business for a long time. For periods of time, people get obsessed about how “the best product will win.” Then, some strategy consultants, or larger incumbents, use their market power to try to create defenses around innovation, and suddenly the conversation shifts away from “build the best product.” And then the entrepreneurial cycle heats up again and the battle cry of the new entrepreneur is “build the best product.”
This isn’t just a startup vs. big company issue. I remember clearly, with amazement, the first time I got my hands on an iPhone. Up to that point I was using an HTC Dash running Windows Mobile 6.5. It was fine, but not awesome. I remember Steve Ballmer in a video mocking the iPhone.
We all know how this story has played out.
I remember a world when Microsoft and RIM were dominant. When Apple and Google didn’t have a product. And when people talked about “handsets”, WAP, and we squinted at our screens while pounding on keyboards that were too small for our fingers. Next time you are in a room full of people, just look around at the different phones, tables, and laptops that you see.
In my startup world, the same dynamics play out. Building the “best product” doesn’t only mean the best physical product (or digital product). It doesn’t just mean the best UI. Or the best UX. It includes the best distribution. The best supply chain. The best customer experience. The best support. The best partner channel. The best interface to a prospective customer. I’m sure I’ve left categories out – think about the idea of “the best complete product.”
This is getting more complicated by the day as technologies and products increase in interoperability with each other at both the data, network, application, and physical level. That’s part of the fun of it. And being great at it can help you dominate your competition.
Give me the best product to work with any day of the week. But make sure you are defining “product” correctly.
Following is a guest post from Chris Moody. Chris is president and COO of Gnip, one of the silent killers in our portfolio. Once the main stream tech press starts noticing Gnip, they will be blown away at how big they got in such a short period of time by just executing. Chris is a huge part of this – he joined Gnip when they were 10 people and has been instrumental in working with Jud Valeski, Gnip’s founder and CEO, to build a mind blowing team, business, and market leadership position.
Following is a great email Chris sent me Friday night in advance of the Foundry Group “Scaling Your Company Conference” which we are having this week for CEOs of companies we are investors in that are on the path from 50 to 500 people.
Startups that experience success are typically built upon a strong foundation of trust among the early founders/employees. This trust has been solidified through long days/nights in small offices working on hard problems together. The amazing thing is that the founders don’t always realize that their company is even operating under an umbrella of trust or that trust is one of their core values. Instead, they just know that it feels easy to make decisions and to get shit done.
When companies try to scale, one of the biggest mistakes they make is trying to replace trust with process. This is rarely a conscious decision, it just feels necessary to add new rules in order to grow. After all, there are a lot of new people coming into the company and it isn’t clear who of the new people can be trusted yet.
A startup obviously needs to add process in order to scale, but if you replace trust with process, you’ll rip the heart right out of your company. When adding processes, ask yourself the following questions:
- Does this new process help us go faster?
- Does this new process help us be more efficient?
If the answer to these questions is “yes” you are off to a great start.
Now ask yourself “Are we adding this process because we don’t trust people to make decisions?” If the answer to this question even has a hint of “maybe” you need to stop and really consider the cost of that process.
Replacing trust with process is like a cancer that will spread quickly and silently throughout the company. One day you’ll wake up and think “this place doesn’t feel special any more” or ask yourself “why is it so hard for us to get stuff done.”
Trust could be one of your most valuable company assets. As a leader, you need to fight like hell to protect it. If you are successful protecting trust, you’ll actually grow much faster and you’ll still have a place where people love working.
I’ve seen trust work at a 700 person company. Trust can scale.
Sean Wise, a professor at Ryerson University in Toronto, has an awesome web interview series called The Naked Entrepreneur Show. Sean is the interviewer for a 45 minute studio show that is entirely produced by students at Ryerson.
When I was in Toronto in the fall, I did an episode with him – it’s definitely in the top 10 of the interviews I’ve done.
David Cohen, the CEO of TechStars, also did an interview on The Naked Entrepreneur.
Enjoy. And it’s going to be fun to see what happens with the SEO on this.