Remember your first business loan? Or, if you're like many entrepreneurs, you may have initially bootstrapped your startup by buying some stuff on your credit card. You were excited and apprehensive: Excited because now you had the cash to invest in your business, apprehensive because you had just taken on a debt you would have to repay.
But that was okay, because you were confident you could create more value than the interest you would pay. Even though you eventually have to pay off a financial debt, gaining access to the right resources now often marks the difference between success and failure.
That’s true for financial debt – but it’s almost never true for culture debt.
Culture debt happens when a business takes a shortcut and hires an employee with, say, the “right” the skills or experience… but who doesn't fit the culture. Just one bad hire can create a wave of negativity that washes over every other employee, present and future – and as a result, your entire business.
Unfortunately the interest on culture debt is extremely high: In some cases you will never pay off the debt you incur, even when a culture misfit is let go or leaves.
Here are five all-too-common ways you can create culture debt that can keep your startup from achieving its potential:
1. You see the ivy and miss the poison
The star developer who writes great code… but who also resists taking any direction and refuses to help others… won't instantly turn over a new interpersonal leaf just because you hire him.
The skilled salesperson who in the short-term always seems to outperform her peers… but who also maneuvers and manipulates and builds kerosene-soaked bridges just waiting to go up in flames… won’t turn into a relationship building, long-term focused ambassador for your company just because you hire her.
The interview process is a little like a honeymoon. You see the best the candidate has to offer. If a prospective employee doesn't look like a great fit for your culture before he is hired, he definitely won’t be after he’s hired.
Never risk making a deal with the culture-fit devil. The soul of your company is at stake. Seriously.
2. You discard the attitude and play the skill card
Skills and experience are worthless when not put to use. Knowledge is useless when not shared with others.
The smaller your company the more likely you are to be an expert in your field, so transferring those skills to new employees is relatively easy. But you can't train enthusiasm, a solid work ethic, and great interpersonal skills – and those traits can matter a lot more than any skills a candidate brings.
According to this study only 11% of the new hires that failed in the first 18 months failed due to deficiencies in technical skills. The majority failed due to lack of motivation, an unwillingness to be coached, or problems with temperament and emotional intelligence.
Think of it this way: The candidate who lacks certain hard skills might be a cause for concern, but the candidate who lacks the beliefs and values you need is a giant culture debt red flag.
3. You try to sell a used car
It’s tempting to over-sell a candidate on your company, especially when you desperately need to fill an open position and you've been recruiting for seemingly forever.
Don’t sell too hard. Great candidates come prepared. They've done their homework. They already know whether your company is a good fit for them based on what they've read about you online. The really great recruits might have been stalking your company for many weeks or months -- seeing what the company feels like.
Describe the position, describe your company, answer every question, be candid and forthright, let your natural enthusiasm show through… and let the candidate make an informed decision. But, don’t oversell.
The right candidates recognize the right opportunities – and the right cultural fit. If you have to try too hard to convince someone, and the love is unidirectional, it's not setup for long-term success.
4. You mistake the rumblings for hunger
Nothing beats a formal, thorough, comprehensive hiring process… except, sometimes, a dose of intuition and gut feel.
At my company HubSpot (grew from 0-500 employees in 6 years) there are five key attributes we value:
· Humble. They’re modest despite being awesome. They’re self-aware and respectful.
· Effective. They get (stuff) done. They measurably move the needle and immeasurably add value.
· Adaptable. They’re constantly changing, life-long learners.
· Remarkable. They have a super-power that makes them stand out: Remarkably smart, remarkably creative, remarkably resourceful…
· Transparent. They’re open and honest with others – and with themselves.
In short, we look for people with H-E-A-R-T, because they help us create a company we love. So we always weigh our impressions against more qualitative considerations. You should too. Think of it this way: The more experience you have – the more lumps you’ve taken and hard knocks you’ve received and mistakes you’ve made – the more “educated” your “gut.” While you should never go on intuition alone, if you have a funny feeling about a candidate… see that as a sign you need to look more closely.
And look more closely.
For a detailed insider’s peek into how we think about culture at HubSpot, check out our Culture Code slides (embedded below for your convenience).
Bottom line: Define the intangibles you want in your employees and never compromise by hiring a candidate who lacks those qualities.
5. You decide to double down
There are two basic kinds of risk you can take on a potential employee.
First the worthwhile risks: Taking a shot on a candidate you feel has more potential than her previous employer let her show; taking a shot on a candidate who is missing a few skills but has attitude in abundance; taking a chance on a candidate you feel certain brings the enthusiasm, drive, and spirit your team desperately needs. Those are good chances to take.
Now the foolish risks: Taking a shot on a candidate with a history of performance issues that you hope will somehow develop a strong work ethic; taking a chance on the candidate who left his last two jobs because "my bosses were jerks;" taking a shot on the candidate who has no experience yet only wants to talk about how quickly and often she will be promoted.
Why do you rationalize taking foolish risks? You're desperate. Or you're lazy. Or you have "other issues to focus on." Or you figure your culture is strong enough to withstand the impact of one ill-fitting employee.
Don't take foolish risks. They almost always turn out badly. Occasionally take potentially worthwhile risks, because they can turn out to be your most inspired hires and, eventually, your best employees.
And never, ever take a chance that creates high-interest culture debt.
The cost to your organization is just too high. And, life is short.
A variation of this article was also posted as part of my participation in the LinkedIn Influencers program.
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A couple of weeks ago, HubSpot shared our culture code deck (http://CultureCode.com) — a document that describes what we believe and how we work.
The presentation, despite being 150+ slides long and on a topic that doesn't involve celebrities, cat photos or currently trending topics has been remarkably well received. It has had over 340,000 views. It's one of the most viewed presentations on slideshare in the past year. I've received many, many emails and tweets with positive comments about the culture code deck (thanks!)
Deck is included below, for your convenience, in case you haven't seen it yet.
Now that the deck is out there and has garnered so much interest, I thought it might be valuable to dig into some of the core tenets of the HubSpot Culture Code and try to do an honest assessment of how well we live up to the tenets. Or, stated differently, how well do we "walk the talk"? In the deck itself, when a particular tenet was more aspirational than descriptive, we tried to call it out. (I think this candor is one of the reasons people like the deck). But the call-out doesn't always capture the degree to which we live up to the ideal, so we're double-clicking here.
So, here are the core tenets with a self-score on how well HubSpot lives up to the tenet. Of course, even this take is biased (I'm a founder, and all founders are naturally biased about their startups) and it's a qualitative judgment call. On my list of things to do is to see if we can make this more measurable. But, that's a topic for another day.
1. We are as maniacal about our metrics as our mission.
Lets break this one down a bit. First of all, we are very passionate about our mission to transform marketing and move the world towards more inbound and creating marketing people love. It's a noble vision, it's a big one — and we invest in it and mostly live up to it.
Mission score: 9/10: I dock us a point because we do have some outbound marketing in our mix of marketing spend. We're not pure inbound marketing. We spend some money on PPC, some telemarketing and some paid online channels. Not a lot — but enough to deduct a point.
Metrics score: 9.5/10: We really are maniacal about our metrics. We pore over data. We slice and dice things like customer cancellation data, SaaS economics metrics, employee happiness surveys, marketing channel data. I've talked to many, many startups and fast-growing companies. Of those, HubSpot is one of the most data-driven and metrics-obsessed companies I know.
2. We obsess over customers, not competitors and “Solve For The Customer”
The statement itself is mostly true (we spend 99% of our time worrying about customers and very little time worrying about competitors), but the underlying mantra of “Solve For The Customer” is not yet as true as we'd like it to be.
We get points for the way we have handled pricing and packaging over our 6+ year history. We have raised prices almost every year, and each time, we go out of our way to grandparent our existing customers and reward them for putting their belief in HubSpot. So, on this front, I think we do really well.
We deduct points because the overall experience of HubSpot is not as smooth as it could be. It's not customer-friendly enough. We sometimes make decisions that are for our self-interest or convenience rather than customer happiness. We're working on this.
We're getting better at having people call B.S. on decisions or directions that are not in the customers' interest. People will speak up with questions like “What's in it for the customer?” or “How is this solving for the customer?” or “Seriously?”. On the one hand, it feels good that people can be open and candid when they don't think we're living up to the SFTC (Solve For The Customer) credo. On the other hand, in an ideal world, these non-customer-happiness focused things wouldn't have to be called out, because we'd always be acting in the customers' interest. It would be natural and second-nature. But, we're a metrics-obsessed, goals-oriented, for-profit company — so it may take some work and practice to have SFTC be natural, 100% of the time. In the meantime, we'll continue to try and catch ourselves before we make decisions that don't make sense for the customer long-term.
3. We are radically and uncomfortable transparent.
We are super-duper, hyper transparent — and our transparency level has moved up over the years, not down. We share all sorts of crazy things with every employee. For example, one of the posts on our wiki goes into detail on every funding round we've done. Details include the What the valuation was, what the common strike price was, how much money was raised, how much dilution there was, etc.
We share just about everything. And, the things we don't share (like individual salaries), we're deliberate and clear about. Deducted half a point simply because nobody's perfect and we can always be better.
4. We give ourselves the autonomy to be awesome.
We're good, but not great in terms of giving ourselves autonomy. HubSpotters have a fair amount of freedom. You can run with an idea. Most things don't require permission. You can talk to anybody in the company, including the founders about whatever you want. We don't have formal policies and procedures for most things (our default policy on most things is “use good judgment”).
So, why the lower score? A few things: First, although we philosophically believe in the “work whenever, wherever” idea, this is not universally enjoyed to the same degree by every HubSpotter. We trust our team leaders to do what is right for their groups and use good judgment. We're also a bit conflicted because the data overwhelmingly shows that working together in the same office leads to more creativity and productivity. So, we understand the importance of co-location, but don't want to force it and take away freedom. For now, we've straddled the issue. Bit of a cop-out.
Our unlimited vacation policy has been a good thing (it's been in place for over 3 years). But, there were a couple of issues. First, some of us didn't really feel like they could take vacations without negatively impacting their work. Second, we had growing suspicion that on average people might be taking less vacation than they should. We didn't know if this was true, since we don't track vacation days — but we wanted to make certain that “unlimited vacation” didn't turn out to be “no vacation” for anyone at HubSpot. So, we made a tweak: Everyone has to take at least two weeks of vacation a year, or face ridicule by their peers. We've also tweaked some things to make it more likely that people do the right thing and take regular vacations.
5. We are unreasonably picky about our peers.
This is true. We are really, really picky about our peers. We're fortunate to have a lot of interest in the company, and for every open position we get many (often hundreds) of candidates. So, we can afford to be picky. It's actually harder to get a job at HubSpot than it is to get into MIT. Our acceptance rate is lower.
The reason for deducting a couple of points is related to the attributes we look for (Humble, Effective, Adaptable, Remarkable and Transparent). For the most part, HubSpotters manifest these attributes — we try to make sure of this during the recruitment and interviewing process. But, we don't always get it right. So, we get a negative point for that.
Also subtracting a half point because not only do we make hiring mistakes sometimes (despite our best efforts), we're not as good as we should be at calling people out when they do un-HubSpotty things. For example, we have being “Humble” as a core attribute (it's actually been an attribute from the beginning). But, not everyone acts in humble ways, and we often fail to call it out. Part of having a great culture is defending it.
6, We invest in individual mastery and market value.
Though we've always believed in investing in our people and wanting to “build not just a company we're proud of, but people we're proud of”, this hasn't been explicit in our culture code until recently. So, we have some work to do here.
First, we're going to take a hard look at where our “discretionary culture spend” (aka “employee happiness expenses”) — which, incidentally is over a million dollars a year. We want to shift our budget to things that help increase mastery and market value. Things like education and leadership training. Yes, we enjoy parties and celebrations too (and those are important), but all things being equal, we want to invest these dollars (in our people), not spend them.
But until then, we still get an 8 on this front. We can do much more.
7. We defy conventional “wisdom” as it's often unwise.
This culture attribute goes towards how much we question the status quo and do things differently. We're actually pretty good at this. Good, but not great. We get points for things like not having offices and executive perks. Our radical transparency and openness defies conventional wisdom. We're one of the few private companies that publicly shares its key financial data (like revenues) every year.
8. We speak the truth and face the facts.
We have a very strong culture of facing the facts and reality. Nobody is allowed to walk around with rose-color glasses on. We don't brush problems under the rug. We don't hide from issues. If anything, we can be faulted for being too critical sometimes. We also do a great job of speaking the truth and being candid about the problems we see in the organization. This happens in meetings, in hallways, over email and on the wiki. When problems show up (as they do regularly), we are usually quick to react.
9. We believe in work+life, not work vs. life
This one is a bit squishy and hard to measure. Generally, we do a really good job of work-life fit. Mostly flexible hours, unlimited vacation, centrally located and relatively easily accessible office. All of those things help. Things that fall into this bucket that we're not great at is diversity — particularly gender balance and getting more women into leadership roles. We're “leaning in” on this, and hope to get much, much better at this over the next few months. Stay tuned.
10. We are a perpetual work in progress.
This one's a bit of a gimme (note to self: We need to replace this tenet with something that's more substantive and less platitudinal).
We don't sit on our laurels. We celebrate victories big and small — but celebrations are short-lived. Though we are pleased with our modest success so far, we recognize that there is still much work to be done. We're constantly trying to improve how we run the busines and ourselves.
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The following is a guest post by Alan Wells, co-founder & product designer at Glyder. [Disclosure: I'm an angel investor in the company. -Dharmesh]
It has been widely reported that at there will be least 1,000 orphan startups this year - companies that raised a seed round last year and will fail to raise follow on financing. The popular opinion in the tech press is that most of these 1,000 orphan companies will die due to lack of capital. As a founder, it's hard not to let this influence your thinking - with all the talk of failing fast, acqui-hires, and overnight success stories, it's easy to believe that your only options are to find a soft landing or shut down and try again with something else. And compared to sticking it out, walking away is most certainly the easier path (although it might make you a punk).
But I believe that in those 1,000 orphan startups, there are great companies - companies that can still put a dent in the universe, companies that can break through if the founders stick to it. Ben Horowitz says that all great CEOs have one thing in common: they don't quit, and at Startup School last year, this theme played out over and over again. Almost every founder that spoke went through a trough of sorrow that lasted 18-24 months before things really started to click for their companies.
Maybe it’s coincidental that the trough of sorrow is usually just a bit longer than the runway you have after an average-sized seed round, but I’m beginning to believe that great companies are often the product of these trying circumstances. Unfortunately people don’t like to talk about what’s not going right with their companies, and there’s not much discussion going on around what founders are doing to successfully navigate these waters.
I’m the founder of a startup that recently decided to double down and do our best to beat the series A crunch, and in the interest of focusing on the road instead of the wall, I wanted to share some of the things I’m learning as we find a way forward.
Acknowledging Your Reality
Founders are optimistic people, so it's easy for us to believe that if we just add this one thing to our product, hit that one key metric, or sign that one partnership deal, investors will come banging on our door begging to give us money. However, if you know things aren't going well or you are already having trouble raising your next round, what your startup needs more than anything is a lucid founder that can realistically assess the situation and identify a path forward.
Doing an honest appraisal of the things that were and weren’t working in our business was an important moment for our decision to press forward. Inside the head of a founder, things can seem great one minute and terrible the next, so getting outside perspective can be valuable as a check to your instincts and emotions. Meeting with advisors and existing investors also helped us get some third party perspective about trends in the market and issues we’re facing.
Understanding Why You're Not Fundable
As a startup founder, you're working in a four dimensional problem space: team, product, market, and timing. Hopes and dreams are often enough to raise money at the seed stage, but in my experience, you need more than that for your next round: you need to convince investors that you're the right team building the right product for the right market at the right time.
If you've been fundraising for three months and haven't gotten a check yet, something is probably wrong in one or more of these areas. Understanding what's wrong is critical to figuring out your path forward, and investors that pass can be the best source for understanding what the missing pieces are.
Until recently, I don’t think I quite appreciated the complexity of getting all this right at the same time, especially when you throw in the added complexity of trying to match up with the various investment theses and historical biases of top tier firms. As Ben Horowitz said, “this is not checkers; this is mutherfuckin’ chess.” Getting useful information isn't always easy - most investors seem to be worried about offending founders and prefer high level statements like "not enough traction" over candid feedback about the holes they see in your business.
I want to thank a few folks that were candid and helpful to us in this way - Ashu Garg (Foundation Capital), Thomas Korte (AngelPad) and James Currier were among the the people that gave us really insightful, critical feedback.
The Founding Team Gut Check
With some honest datapoints on the investor perspective of your business, you have the information you and your co-founders need to have a gut check conversation about the state of your business. You'll likely find your product, market, team or timing are in conflict with what investors see as likely to be a homerun, and you need to decide how to respond to that mismatch.
In our case the problem seems to be mainly around market - we're targeting very small businesses, a fragmented market where there is no historical precedent for big winners being built within the timeline that venture investors need for their 10x returns. We're well aware of the historical challenges in serving this market, but we believe that due to a number of new trends, big winners will emerge in this space in the next 3-5 years. Very few investors agree with us.
Our focus on very small business is one of the founding principles of our company, and we believe deeply in the potential that lies in serving this market. Our conviction in serving this market increased when we launched Glyder and started seeing the positive user response to the product. Because of this conviction, we decided that we would rather continue focusing on this market than switch to a different target market, even if that means we're not fundable in the short term.
Having an open and candid conversation with our team about the challenges to our company was a great chance to gauge everyone's commitment to the business. Building our business without more capital will be difficult, but when everyone voiced renewed desire to keep going forward, it helped me as the CEO get excited about figuring out how to do it.
Moving Forward & Changing Tactics
Paul Graham likes to tell founders that "the surest route to success is to be the cockroaches of the corporate world." The analogy works particularly well for orphan startups, because without additional capital, you must be resilient, resourceful and self-sufficient as quickly as possible. Here are some of the changes we’ve made as we continue building our business.
Incentivizing Existing Investors to Stay Involved and Excited
Before we started trying to raise a new round, we gave our existing investors the opportunity to put more money into the company on fairly favorable terms. The cap on this new note was lower than the cap that we had previously raised money on - although our business was much further along, the funding environment had changed as well, and we wanted to make the decision to put additional capital in easy for our existing investors.
We also went back and amended the documents for all investors who had put money in on the higher cap and gave them the lower cap instead. This is unusual, not legally required, and meant that we were giving up additional dilution.
Why would we voluntarily increase dilution? Our investor group includes friends & family, angels, and the great team at 500 Startups. Our relationships with most of them started long before this company, and we hope they will extend far into the future. These relationships motivate us to keep building the business - they trusted us with their hard earned dollars, and although they all know the risks of betting on our startup, we want to show them results. When it comes to a decision like the one we made with the cap change, the cost in dilution was well worth the goodwill it generated among our investors. It also demonstrated our commitment to acting with integrity even when things aren't going according to plan.
Re-evaluating the Product Roadmap
As we heard the skepticism from potential investors while trying to raise more capital, product priorities were the first thing to change for us. We no longer have the luxury to focus on user growth over monetization, so our entire product roadmap shifted to focus on revenue. Our app, once offered for free (to maximize signups) is now a paid download. We don't have the luxury of supporting users that aren't willing to pay for what we make.
Lowering Burn Rate
In addition to shifting product priorities to revenue, we also made dramatic reductions in burn rate so we could reach profitability faster. This meant letting several team members go - by far the hardest decision in this entire process - and asking remaining team members to take a pay cut (we softened the blow with this by giving additional equity). The changes in product and burn rate have put us on a path to reach cash flow positive before we run out of capital.
Preparing For Battle
In addition to the tactical changes in our business, the process we’ve gone through in the past three months has mentally and emotionally prepared our team for the road ahead. We know who we are and what we’re working toward, we’re aware of and very comfortable with the contrarian stance we’re taking, and we believe the long term opportunity is well worth the short term sacrifices we are making. As they say on Friday Night Lights, “clear eyes, full hearts, can't lose.”
I think Andrew Chen had it right when he said
, "there’s always another move." If you’re the founder of a startup staring headfirst at the Series A Crunch and you can find the will to keep going, your job is to find that next move and make it happen. I hope to see more discussion on how companies are sticking with it and navigating the trough of sorrow. If you're in the midst of this process and need someone to bounce ideas off, drop me a note at @alanwells
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Anyone can have a killer startup idea, but in order to make that idea succeed you’ll need an unbeatable team. Crafting the perfect team is an art -- one we're constantly trying to refine at my startup, Boundless.
We’ve found that a structured process yields the best new hires. This starts with first understanding the skills we need to fill. But we don’t just try to fit anyone with the right experience into a role - we go further and search for the right personality for the position as well. Throughout the entire hiring process, we’re constantly looking for signs of the four most important startup personalities: The Beast, Lara Croft, The Architect, and The Most Interesting Man in the World.
Our initial process is probably quite similar to many other startups. First, Boundless job candidates need to have a presence online. If we can’t find you online, you don’t exist, which means we’re not going to start the interview process. Next, candidates go through a phone screen to determine basic experience and qualifications. Those that survive the phone call visit with multiple team members on-site, where they’re assessed on skill and personality.
However, the final step is a little different. Before securing a job at Boundless everyone gives a 20 minute presentation on your personal or professional passion. We like to give the entire team a chance to see the candidate, and give the candidate an opportunity to impress the team with anything they want. We’ve seen people present on Tai Chi, cupcakes, coffee, how to build an art collection on a budget - all kinds of interesting, quirky and funny topics. And, of course, by this point in the process we have a strong idea of the type of a person the candidate is.
The Four Critical Startup Personality Types
The Beast, Lara Croft, The Architect, and The Most Interesting Man in the World. When filling a role at your startup, you need to find a candidate that embodies characteristics from each of these personalities if you are going to create a culture that changes the world. I firmly believe that a large part of my company’s success is driven by employees with characteristics strongly matching these personalities.
Here’s how to identify these four startup personalities:
The startup Beast, modeled after the X-men character, possesses a “get shit done” mentality. A Beast’s raw animal output ensures they get more done in a day than even the most caffeinated worker bee. These people strive to be the very best in their profession, and doing more than seems humanly possible helps them get there. Look for people with high levels of productivity at their last positions and ridiculous amounts of drive and energy.
When hiring, look for adventurers with an entrepreneurial spirit. These Lara Croft types create goals and projects for themselves to enhance the company values or goals. People who are self starters, self motivated, who have built things on their own time to scratch their own itch are Croft. Their adventurous minds dream big to help inspire the team.
The Architect, inspired by the character from The Matrix, understands the big picture and can still focus on the details. These are the people who have a productivity hack for nearly all aspects of their life. Being productive and organized with the details helps The Architect keep the big picture in mind. You can spot Architects as people who have taken pride in a craft or know the intricate details of their previous position plus can clearly articulate the high-level strategy.
The Most Interesting Man in the World
At any fast-growing startup, you’ll spend a lot of time collaborating and hanging out with your colleagues. To make your office lunches or happy hours more enjoyable for all involved, hire people with character and charm for your team. The Most Interesting Man in the World, seen in the Dos Equis commercials, adds depth to your company culture. And in tough times, the Interesting Man (or woman) is the person you want fighting on your team and who help keep you going during the tough time. Don’t just look for goofballs - find people who have overcome difficult challenges and kept a positive attitude.
By hiring based on these four personalities, Boundless has built a team that not only has the capacity to build the best learning platform possible, but a team that continues to attract other top-notch people to share the journey with us.
We recently had the pleasure of welcoming Healy Jones to Boundless as our new Vice President of Marketing. The Beast in Healy helped our open textbooks initiative get written up in TechCrunch, and his wine tasting team presentation won him a nod in the Most Interesting Man in the World category. He joins Boundless from OfficeDrop where he was VP of Marketing, where he helped grow the user base 120 times in two years.
Whether you’re hiring a new team member as a VP or entry-level, remember that killer personalities help make the journey from idea to strong startup possible.
This is a guest post from Ariel Diaz. Ariel is the CEO and co-founder of Boundless, which creates free textbooks for college students.
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A few minutes ago, I came across this tweet from my friend and co-founder at HubSpot, Brian Halligan.
This got me to thinking (which is often a dangerous thing), am I taking enough risks? Am I being daring enough? Am I being a hero? Answer: Not often enough.
So, here's advice to my future self and all of you: *DO* be a hero.
1. Be a hero. Go after that big, powerful incumbent that doesn't delight its customers enough.
2. Be a hero. Hire that awesome, amazing person -- even though they don't fit any of the roles you're currently looking for.
3. Be a hero. Make that sacrifice that will negatively impact your profits but completely aligns with your passions.
4. Be a hero. Make that really, really hard decision that even the smartest people you know can't seem to agree on.
5. Be a hero. Say no to that accomplished, super-successful person that your team interviewed, loved and convinced to join -- but doesn't fit your culture.
6. Be a hero. Kill that stupid company policy that nobody can recall the rationale for, but you suspect was because someone (maybe you) had a friend who knew a guy that had read about a startup that didn't have that policy and that company failed.
7. Be a hero. Launch that super-secret project you've been working on even though it's more likely to fail than succeed.
8. Be a hero. Admit that you've changed your mind on the decision you so passionately advocated for a few months ago
9. Be a hero. Confess to your team that sometimes you take the safer path out of fear and rationalize that you're doing it for the good of the company.
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The Lean Startup method strongly advocates experiments -- and for good reason. It's critically important for a startup to acquire validated learning as quickly as possible. How quickly can you get through a learning cycle? How efficiently can you get to the answers to crucial questions?
You might run experiments that will answer some of your most pressing questions:
1. Will adding this feature cause more people to start paying for the product?
2. If we increase our prices, will our overall revenue increase or decrease?
3. If we make this feature that was previously free part of our premium offering, will users be upset?
Experiments are great -- but one word of warning. Be mindful of how much data you need and how "clean" your experiment needs to be in order to yield the learning you are seeking. A mistake we often make is looking at the "early evidence" from a particular experiment -- and then, in the interests of time and/or money (both of which are in short supply), use that early evidence to make an "educated guess" and move on.
This "educated guess" based on some early evidence is often "good enough". There are lots of questions for which you don't need perfect answers. All you need is something reasonably better than random -- or something that validates a strong "instinct" you already had.
But, be careful. The rigor of your experiment should match the importance of the issue at hand. If it's a big, important decision that will shape your company for a long time, don't just rely on the "early evidence" and use it to rationalize whatever it is that you wanted to do in the first place. Take the time to let the experiment run its course. For big, important, critical issues -- the extra rigor is worth it.
Example: You want to know whether taking a particular feature *out* of your product is going to have a major impact on your users. The feature didn't work out as well as you had hoped, and it ended up being very expensive to maintain. So, you send a survey out to your 5,000 users. Of the first 500 responses that come back, 80% of the people ranked the feature as "Super-duper important, if you take it out, I'll use another product". So, you could just take this early evidence, extrapolate and say -- "Hey, if 80% of our users really want this feature, we should just keep it in." In reality, what might be happening here is that the users that were most passionate about the feature, and thought that you might cut it are the ones that first responded to the survey. Users that were kind of "meh" (or didn't even know the feature was there) might take a while to respond, if it all. Basically, the early responses are not representative of your overall user-base. If you let more of the evidence come in, you might find that the actual number of users that care is much smaller than the "early evidence" showed.
The Danger of the Self-Fulfilling Prophecy
Another thing to be careful of when it comes to "early evidence". If this early evidence leaks into the organization, you often will trigger a self-fulfilling prophecy and wind up with a potentially misguided decision.
Example: You ask your sales team to start selling a new offer (could be a feature/product/promotion). Understandably, the first few attempts don't work out very well -- the sales team hasn't quite figured out yet how to position the offering. It will likely take a few weeks. In the meantime, word starts to spread that this "new thing" isn't selling all that well. As a result, the team pulls back a bit and reverts to selling the "old thing" (change is hard). This of course, causes even fewer sales of the new thing -- and it ultimately gets abandoned. Now, that might have been the right decision. Perhaps the early evidence was right -- but you don't know for sure. What if just a couple of weeks of training and tweaking would have fixed the issue. Perhaps it would have been awesome.
In summary: Don't confuse early evidence with compelling evidence. Avoid letting early results of an experiment taint the rest of the experiment. And, match the rigor of your experiment to the importance of the decision on hand.
Any examples you can think of when early evidence is misleading?
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There are great lessons to be learned from many exceptional companies like Google, Apple and Amazon. But, can you just copy the best practices from these amazing companies and use them to succeed at your own business? I doubt it.
There is risk of pulling out the wrong lessons from these outliers. To be exceptional, they have to be the exception -- not the rule. Often, what worked brilliantly for them might be a blunder for you.
If you or one of your colleagues ever make arguments that sound similar to these, take a step back and question your assumptions:
"This worked for Apple and Steve Jobs..."
"But, Google does it this way, and they've done really well..."
"That didn't seem to stop Amazon..."
Here are the types of mistakes we make when looking to learn from leaders:
1. Then vs. Now
When you are looking to learn from great companies, be mindful that you undestand the history of the strategy or tactic you are looking to learn from.
Example: Google makes deep investments in technology and infrastructure. Rather than taking "off the shelf" tools and technologies, Google uses custom-built servers and operating systems. Though this makes great sense for Google, given their scale -- does that level of customization make sense for your startup? What did Google do when they were your size?
2. Loss Leaders are a Luxury
Big, well capitalized companies can often make big bets and investments that most startups simply can't afford. They can often use these "loss leader" strategies because they have a diversified revenue base and can gain an advantage by losing money in one project with the hopes of making it up in another -- often after many years.
Example: When Amazon sells the Kindle, it intentionally does it at razor thin margins (the actual razor, not the blade). The reason Jeff Bezos provides for this strategy is simple: "We want to make money when people use our device...not when they buy it." That works great for Amazon, because in the long run, they will make money. But, unless you're Amazon and can afford to give something away at low or no margin, it might not be the right strategy for you.
3. Great companies don't always make great decisions
When we look at successful companies, we automatically assume that every strategy or tactic they used contributed to that success. That's unlikely. Sometimes companies are successful despite some missteps along the way -- not because of them. If you're making a big decision based on whether or not it worked for someone else, dig into the details. Try and figure out the context of that particular strategy. Talk to the people involved. Did they think it was a great strategy? What were the tradeoffs? What surprised them? If they could do it over again, would they?
Example: When Apple decides for a more closed and proprietary system, do they win in the long-term because of those decisions -- or despite them, because they are so good at everything else? Could other companies succeed with a similar strategy?
It is a weak argument to say you should be doing [x] just because some super-successful company did [x] and it worked for them. They were a different company at a different time -- and in many cases, even the teams that made some of those decisions are likely not certain as to whether they were the right ones.
When you're faced with big, company-changing decisions don't use outliers as a way to rationalize what you want to do. Dig deeper. Do some additional research. Analyze the tradeoffs and make the right decision given your context.
What are your thoughts? Any other common mistakes you've seen people make when trying to learn from the leaders?
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The following is a guest post from Dr. Jared Scherz, founder at UFeud, LLC, creators of ufeud.com, uframe, and uscore technologies.
As a well educated psychologist with a successful practice, the decision to launch a startup tech company tested the boundaries of my sense of self confidence and competence, as I was venturing into a field I knew little about. It was embarrassing to have to tell people on a somewhat regular basis that I didn't really know what I was doing. So how do I feel about that?' One day I'm plagued by self doubt and the next I'm feeling more confident because I figured something out. The excitement of a potentially lucrative new venture was tempered by the anxiety of self doubt and fear of the unknown. A destructive cycle of confidence and self doubt can develop as a result, and can wear out even the most resilient of people if not recognized so the pattern can change.
To help me climb out of this spin cycle is being able to identify and own my experience. Knowing what I'm feeling and how it influences my behavior or decision making is key to managing this dichotomy. This (internal) awareness helps reduce the chances of letting these unpleasant feelings translate into actions that require more energy and time to correct. If I know what I'm feeling and why, I can differentiate between what is my stuff and what is an organizational matter.
“I think I deserve more shares”: Let's use conflict with a co-founder as an example. The idea of a partner wanting to renegotiate their terms can be a major pitfall that sinks a startup, according to Noam Wasserman (The Founder's Dilemmas). This dilemma is common because we don't know well enough the contributions of each partner early in the project, and roles often change throughout the process. When a partner believes they are contributing more and their worth has increased, they may naturally want more equity and recognition.
Our initial response may be rigidity. Tensing up and digging in our heels, justifying our defensiveness as our partner's misdirected priorities. How dare they focus on greed as opposed to the company? Aren't they a team player? Why are they willing to sabotage everything we have been working toward? Then we ask ourselves the question, why does this feel like a betrayal? What's being evoked may be a loss of control or a feeling of fear that we are losing our grip on the company. Perhaps we lose trust in our partner, conjuring up all the times we have been let down by somebody in the past.
A startup is like a newly hatched chick, small and vulnerable to prey. Why can't I protect and control this entity I've worked so hard to create? After all, nobody was there at 3:00 am when I came up with the idea. (If they were, they probably could have shamed me out of that celebratory bowl of chocolate ice cream).
Paying attention to our experience will help us in a few different ways. We will have greater empathy towards our partner, allowing them to feel heard. Once your partner feels understood, they aren't going to put on a full court press to back you into a corner. Paying attention to our experience also allows us to separate past issues versus current ones. I'm aware that my partner is just nervous about all the extra work they are doing and they aren't like my ex-girlfriend who slept with my best friend in high school.
Expanding our self awareness helps with everyday interactions — not just the high intensity ones. Take a situation in which your programmers aren't following through on tasks with the alacrity they did when excitement in the project was higher. Aggravation can easily set in and snippiness can follow. We get on their case, which in turn causes resentment on their part and even slower responsiveness. Or, we can utilize our growing awareness and realize that we are being driven by fear.
In this scenario we add on a new level of awareness, which is external. Now instead of looking inward we are scanning our environment to pick up clues on what may be happening with others or even systems. In the example given above, our programmers may be feeling disconnected from the organization. They don't see all the effort going into marketing or how the sales team is getting positive feedback from the clients. All they hear is what isn't working and how they need to work faster. Their initial excitement has diminished and their frustration level is growing, hence their slowing response time. So getting on their case may work temporarily but in the long run it can create more chronic indifference.
Now that we have scanned our environment and determined that they are feeling detached and discouraged. We integrate this new information with our own heightened awareness and devise a more intentional response which serves both sides better.
Awareness is more complex then we realize it to be. It involves scanning both our internal and external environments to determine the impact we are having on others and others are having on us. Most situations that can be handled in a way that promotes cohesiveness on our teams can turn into disasters if we aren't using our awareness. A startup CEO with a high level of awareness will influence their organization in profound ways, most importantly helping the startup to become adaptive.
An adaptive organization as described by Eric Ries (The Lean Startup), is one in which the team uses data to learn and grow. Ries bases his concept on a validated learning approach that allows a company to measure their efforts and then pivot accordingly. What is also important in addition to learning from how our product is responded to, are the processes which exist among our team. Awareness is the key to understanding our own responses, the behaviors of our team, and the way in which different parts of the organization work together to form a whole.
Startups that don't prioritize adaptation are more prone to making mistakes and repeating these mistakes which can easily become maladaptive patterns. Getting excited after days of self-doubt and then making impulsive decisions without enough information is just the type of pattern that can be prevented with greater awareness. Adaptation is the direct result of scanning our environment and making changes based on the information obtained in a timely manner.
There are quite a few obstacles to improving one's awareness. The first is a CEO who is highly intelligent. Sound strange? Intelligent people tend to over-think and analyze. Awareness isn't about figuring things out with your mind; it's about using your body or more specifically your senses. Ask yourself what you feel in your gut, where you are holding tension, or what memories are being evoked.
Another obstacle is our resistance to giving up control. My startup is a product of a great idea, a tremendous amount of hard work and sacrifice, and we aren't about to see it decimated by apathy or greed. Remember that others may not feel the same passion as you do but they can be helped to take greater ownership if they know their feelings are valued. Taking time to scan others experience and verbalize what you imagine them to be feeling will go a long way toward building loyalty.
So take a moment and step back before reacting to people or situations. Ask yourself what is going on inside you to trigger your feelings. Consider what is driving the actions or inactions of others around you. Scan the team to see how people are working together and what the underlying causes are for problems. Base your responses on what emerges through your awareness to prevent impulsive decision making. As the CEO you are responsible for attending to the processes of your startup, not simply executing a wonderful product or service.
What do you think? Have you tried deliberately increasing your awareness — internal or external?
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The following is a guest post by Diana Urban. Diana is the Head of International Marketing at HubSpot, all-in-one marketing software
International expansion can provide a startup with tremendous growth opportunities. It allows your company to grow faster by casting a wider net, and helps diversify your revenue stream. While global expansion can be an exciting time, it’s a significant undertaking and requires some careful planning and making some hard decisions.
Today, HubSpot announced its European Headquarters launch in Dublin, Ireland. As part of the HubSpot International team, I wanted to share some of our learnings with you.
Here are six important things to consider when expanding a startup internationally:
1. Follow your customers and prospects
To determine where your biggest global opportunity exists, take a look at your customer base. If 50% of your International customer base is in Europe and only 8% is in Latin America, it makes a lot of sense to choose Europe as your International HQ. Let your domestic team build your Latin American segment up to a point where it’s ready for its own HQ. Make sure you have enough proven revenue in a region before opening up a new branch.
Also take a look at where the majority of your non-domestic prospects, or leads, live. You may notice that you’re generating the most leads in a country other than your largest international customer base. If this is the case, take conversion rates and cultural factors into consideration. Even though you’re generating a lot of leads in a particular country, can its population afford your products’ price point?
Finally, as much as we'd like to "follow the metrics" and make purely data-driven decisions, the choice of location might come down to people. Does one of the founders have a particular affinity or background in a location? Do you already have one of your stars anxious and eager to start an office in a particular country? These "people-based" factors should be considered. Often, the "optimal" decision from a metrics and revenue perspective is not the "best" decision.
2. Set ambitious international goals
Expanding internationally is a big investment, so it’s important to set ambitious goals to get the highest ROI possible. For example, plan for 30% of your business’ revenue to come from your global HQ within 3-5 years. Defining an international revenue goal for your international office will help you determine things like:
- How many sales reps do you need to generate $X in revenue?
- How many marketing leads do you need to generate to make those reps successful?
- How quickly does your international customer segment need to grow to reach that goal within 3 years?
- How many customer service reps will you need in order to serve this segment?
Whatever numbers you set to suit the needs of your own business, make sure you set those goals ahead of time so that you can plan accordingly every step of the way. Setting clear goals ahead of time will help keep the team that opens up the international headquarters accountable for its success.
3. Hire locally but be consistent culturally
A major benefit of opening up an office overseas is being able to recruit local talent, who will be experts in your industry in their culture. No matter how much you’ve been educated in the nuances of the culture you’re entering into, nobody will be better prepared than the people who grew up in the region.
If budget allows, try to bring over your new global employees for a couple weeks of training in your primary office. They will likely be teleconferencing frequently with your primary HQ, so having them join for training in-person helps put a face to the name for all future interactions.
Even though you should plan to hire mainly locals to staff your International Headquarters, be sure to maintain your company culture by sending over a group of expats, even if for a limited time range -- six to 12 months can suffice.
Most importantly, ensure that from Day 1, members of your international team feel like they're part of the company. Give them training. Give them career opportunities. Give them access to information and resources.
4. Network and attend conferences
Although America is becoming very dependent on virtual communication, in-person interaction is highly valued in cultures like Europe and East Asia. Use conferences and networking events to make connections with local industry-leaders in the region you’re opening your new office. Plan to stay a couple extra days after the conference for 1:1 meetings with your new connections. Meet with local press in-person to provide interviews on your global expansion plans.
Networking with the locals will help you spread the word not only about your product, but about the career opportunities now available to the local marketplace. You may need to hire aggressively your first couple years in your new office branch, so networking is imperative to drive high-quality candidates to your business.
5. Don’t underestimate cultural differences
Just as marketing best practices vary culture-to-culture, so do business practices. For example, in the U.S. it is typical for employees to have 10 non-holiday vacation days. However in Europe, it is customary for employees to have at least 20 non-holiday vacation days -- and be required to take all of them. It’s important to take this cultural difference into account when projecting sales quotas and development sprints.
6. Get support from finance, HR, and ops experts
When opening an office abroad, there are a lot of overhead elements to plan for, such as:
- Negotiating leases and contracts
- Determining company structure
- Setting up accounting and tax reporting systems
- Supporting expat and local employees’ HR needs
Expect that you will need ongoing support from your finance, HR, and operations departments, and plan to hire agencies to help if you don’t have the resources in-house. Again, global expansion is a big investment, and it’s important to get these basic elements right from the get-go.
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The following is a guest post by Annie Bourne. Annie is the VP Business Development and General Counsel of Kinvey, and author of The First Secret of Edwin Hoff.
Thank goodness for printed pages. Pages trap teachings, and sometimes files trap pages. I kept a note that Danny Lewin, co-founder of Akamai Technologies, wrote in March 2001 describing what good leaders do to build successful teams, and why they work. While Danny probably learned these lessons during his tour as a commando in the Israeli special forces, he applied them as co-founder and CTO of Akamai.
As many people in our industry know, Danny was tragically killed on American Airlines Flight #11. Those of us who were lucky enough to work with him try to remember, and share, what we learned from him. I worked with Danny at Akamai from 1999-2001. On this anniversary of September 11, 2001, I'm remembering the three keys to team leadership that Danny explained.
1. To inspire trust: Lead by Example
2. To build trust among teammates: Suffer Together
3. To restore trust when it weakens: Hold People Accountable and Get Rid of Non-Performers
1. To Inspire Trust: Lead by Example
For a team to function well, its leader must make decisions that each team member must consent to follow. It all hinges on trust, and the leader must earn it.
People only trust those whom they respect. To earn the respect of her team, a leader must demonstrate the highest level of ability in at least one of the skills asked of the rest of the team. Not in all of them but in at least one e.g., coding, negotiating, selling, or positioning. Any strong player on a team will only feel safe delegating decision-making to someone whose abilities they respect.
Shared sacrifice also inspires trust. A great leader must identify and then exemplify the behaviors that he needs the team to adopt. If developers often have to stay up to the wee hours to make a deadline, a good leader brings them pizza and mountain dew and then pulls up a chair and switches on a dark machine. If costs are managed closely, the leader will fly in coach and pay for any perks on his own dime. Others will do as he does.
A great leader also knows that each team member relies on her to provide him with the three things he needs to stay focused and execute well:
Set specific and clear goals like a north star. If there is no clear common goal, there is nothing to achieve. Teams grow frustrated at indirection and disperse.
Make firm and final decisions. Solicit input, but once the leader makes a decision, she must hold to it, and enforce it. This also creates a language within the team that teaches each member to make better, crisper decisions themselves.
Always follow up on work that you delegate. Leaders can create new accountability in others, but should never abandon their own responsibility for the ultimate outcome. The best leaders follow up often and in detail.
I remember when Danny gave me the goal of creating new technology partnerships with big companies like IBM, Oracle and BEA. He told me “anyhere you need me, I'll be at that meeting.” He told his secretary to make my meetings his priority. (Judging from her expression, and how many other people were lined up for their 10-minute update with him, I had a feeling he juggled a number of simultaneous priorities). The effect: I carried the ball, but I knew he was on the field too. I still have the notebooks from our daily status meetings, which felt like exciting and motivating team huddles, not micro-management.
2. To Build Trust Among Teammates: Suffer Together.
Having earned the trust of his team, the leader must seed trust among the teammates. People abandon petty rivalries when something threatens them. Great leaders should not try to protect their team from these outside pressures. Instead they should spotlight the common threat and let every member feel it. In business, the threat of real competition, or of feeling how close the line is between of success and failure, is an opportunity to let a team suffer together. Through this they learn to trust each other or perish.
To Restore Trust When it Weakens: Hold People Accountable and Get Rid of Non-Performers.
Great leaders hold people accountable successfully by honoring an unspoken contract between them. The team members make commitments to each other and to the leader. Then the leader measures each of them fairly and by the same standards - by how well they did what they said they would do. The leader pays each member by how well they performed their part of the deal.
But when one member fails to execute, other teammates see it immediately. They lose confidence both in the non-performer and in the leader for failing to uphold the deal. To preserve the trust that the leader has inspired by example and spread with shared suffering, the leader must remove the non-performer from the team. This restores trust between the team and the leader because they see the leader honoring the contract between them. They feel reassured that they, and their remaining teammates, must be performing. Then they trust each other to do their jobs and can concentrate on doing their own. (Of course, removing a non-performer only builds trust when the team member has had a fair chance to achieve his commitments, fair notice when performance is sub-par, and a fair chance to improve.)
Danny knew a lot about leadership, and he brought an unusual combination of skills to Akamai. In his remarkable and tragically short life, he was a commando in the Israeli Special Forces counter-terror group, then a genius mathematics graduate student at MIT, and then a visionary billionaire entrepreneur. He taught us some spectacular lessons about strategy, influence, and leadership. Danny inspired nearly everyone he met to reach farther, and do more.
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